The crown jewels: JS Bank to buy out HSBC’s Pakistan operations

Both banks decline to disclose sale price, to announce more details in coming days.

KARACHI:

The race is already over: less than six months after it was first disclosed that HSBC was interested in selling off its Pakistani operations, JS Bank has won the bid to buy them out, for a price that is yet undisclosed.

In a statement released on Tuesday, JS Bank confirmed an earlier AFP report that it had agreed to buy out HSBC Bank Middle East Ltd’s Pakistani branches and their assets, beating out rival financial conglomerate KASB Finance and Turkish banking giant Isbank.

Both banks remained silent on the sale price. “We have agreed on a sale price mechanism, but the final price has yet to be determined,” said Imran Shaikh, head of marketing at JS Bank. Shaikh declined to offer more details, saying only that the mechanism would be disclosed to the public in the coming few days. HSBC Bank representatives were unable to offer any comment on the matter.

Yet regardless of the price, the acquisition of JS Bank is likely to come as a coup for its parent financial conglomerate, the JS Group, which has been attempting to revive its fortunes after the financial crisis of 2008. JS Bank was hit particularly hard, announcing heavy losses in 2009 and 2010, but has since come back with a strong year in 2011, with a net income of Rs360 million.

JS Bank’s recovery has come in large part owing to a massive rebranding campaign, designed to persuade customers that it is a strong, stable financial institution. The strategy appears to have worked so far. In just the first six months of 2012, the bank’s deposit base has jumped by 25% to nearly Rs52 billion. Profitability is up an even more astonishing 178% for the first six months of 2012, compared to the same period in the previous year.

The acquisition of HSBC Pakistan is likely to help JS continue its efforts to build the brand of a stable, high-quality financial institution. With its high minimum deposit requirements and strong customer service, HSBC has attracted some very high net-worth individuals as its clients, in addition to financially stable multinational corporations.

Despite having only 10 branches, HSBC Pakistan has over Rs46 billion in deposits, though that number has stayed virtually stagnant for two years as the bank struggled to define a growth strategy within the country before finally giving up and selling out. Yet despite the lack of growth in deposits, HSBC Pakistan has continued to see strong profitability, making Rs971 million in net income during the year 2011, nearly twice as much as the previous year.

The key challenge for JS Bank will be to retain both its talent as well as its clientele, something which the bank’s management appear to be focused on as part of their acquisition and integration plan, some of which JS Bank’s team hinted at on Tuesday.

“This acquisition will act as a catalyst in achieving JS Bank’s growth strategy to position the bank as one of the key players in the financial sector with the introduction of premium banking and credit cards suite,” said the bank in a statement released to the press.

HSBC’s exit from Pakistan comes despite the fact that the bank has a high quality portfolio in the country that has never seen negative net income. The bank’s global management has decided to focus its Asian operations in nine countries: Australia, China, Hong Kong, India, Indonesia, Malaysia, Singapore, Taiwan and Vietnam.

According to the Financial Times, the bank has already sold or closed down its operations in Japan and Thailand, and is in talks to sell its branches in South Korea. It is also reportedly contemplating an exit from New Zealand as well as three other Asian countries.

Published in The Express Tribune, September 12^th, 2012.