Dog fight over RBS heats up


April 28, 2010

KARACHI: RBS Pakistan denied rumours on Tuesday that it was no longer in negotiations with EFG Hermes, the Egyptian investment bank, over the sale of its entire operations in the country.

“We are in negotiations with both EFG Hermes and Faysal Bank,” said Maryam Agha, head of corporate communications at RBS Pakistan in a telephone conversation with The Express Tribune. Ms Agha was unable to provide further details about the transaction. She also declined to disclose whether the negotiations were being led by RBS Pakistan or the global management of RBS based out of Edinburgh, UK. There had been rumours in recent days of a meeting in Dubai between the management of RBS and Faysal Bank in order to proceed with negotiations over the sale of RBS Pakistan.

The exclusion of EFG Hermes from that meeting had led many to speculate that RBS was no longer considering their bid. RBS had decided to sell its Pakistani subsidiary in early 2009 and had concluded an agreement with MCB Bank in December 2009 to sell RBS Pakistan for $87 million. However, MCB Bank was not able to get the necessary regulatory approvals in time and the deal fell through. Soon afterwards, RBS announced that it would reopen the process for selling off its Pakistan branches.

Four financial institutions showed interest in buying the company: Faysal Bank, EFG Hermes, Soneri Bank and Invest Capital Investment Bank. The State Bank of Pakistan gave approval to Faysal Bank and EFG Hermes to begin due diligence on the transaction, essentially permission to examine RBS Pakistan’s financial accounts in detail in order to determine how much they are willing to pay for the bank. Faysal Bank’s management could not immediately be reached for comment. Dina Al-Sonbaty, executive director for corporate strategy and investor relations at EFG Hermes declined to comment on the RBS transaction.

Faysal Bank seeks high-end clientele Each of the two contenders has different strengths and different possible synergies with RBS Pakistan. Faysal Bank, for instance, wants to increase its size and become one of the larger players in the Pakistani banking sector. Should it be able to acquire RBS, it will become the ninth largest bank in Pakistan, from its current position as the 13th largest bank in the country. Faysal Bank has also been seeking to build a franchise that caters to high net-worth individuals, a line of business that offers more lucrative services such as asset management, life insurance and cash management solutions.

The high volume of money per customer reduces the overall operating cost of the bank while increasing its revenues, making premium banking a highly attractive business. Some of Faysal Bank’s competitors have already launched such services, notably MCB Bank which offers a wide range of services to its MCB Privilege clients. RBS Pakistan also has a premium banking brand called RBS Royal Banking, which may be one of the biggest attractions for Faysal Bank.

A foothold in Pakistan for EFG Hermes The Cairo-based EFG Hermes, one of the largest investment banks in the Middle East and North Africa (Mena) region, has been looking to expand its presence beyond the markets it is currently present in and has identified Pakistan as one of its targets. The bank, however, has almost exclusively dealt with capital markets, an industry in which it has gained a dominant position in the Middle East.

Another one of its strategic goals has been to become a universal bank, a financial conglomerate that offers a wide range of services, from investment banking and asset management to securities brokerage as well as commercial and retail banking. The acquisition of RBS Pakistan would allow the firm to gain its first foothold into commercial banking after its earlier acquisition of Lebanon’s Banque Audi ended in the firm selling off its stake in the Lebanese lender.

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