The closure and exit from Pakistan is one of the moves from HSBC, under its strategic restructuring plan; the bank is planning to close its operations in few of the Asian countries which have very small share in HSBC Asian market operations.
The bank started its operations in Pakistan in 1982 and currently it has an asset base of around PKR 59 billion as on 31 December, 2011. HSBC (Pakistan) falls under small banks’ category due to its limited operations with a network of only eleven branches across the country.
Due to adopting a policy of operating at a limited scale; the bank has however, missed the opportunity of tapping expansion in one of lucrative local banking industry. As the HSBC management has decided to sell its operations, now the major question is who will be the lucky one to get this bank having a small but clean asset base.
Currently, there are three major players in the market who might be interested to acquire this entity; MCB, UBL and KASB
The analysts have said that keeping in view the past good financial performance, buying this bank would be good deal for acquirer.
One of the most promising features of the HSBC’s assets is its limited and controlled NPLs. Currently on an average around 16% of the Gross advances of the banks existing in the Pakistani markets are non performing. However, HSBC managed to curtail the infection ratio around 4.8% as at 31 December, 2011.
The deal is also considered safe on the grounds that bank’s total advances are only 35% of total asset base, with bank balance and balance with treasury banks, lending to FI’s and investments accounted for a major portion of assets.
Another important feature of HSBC’s financial stability is the spread ratio of around 50% in the year 2011; which is also less by around 5% from the 55% spread ratio of large banks. However, this is significantly more than those of average ratio of mid-sized and smaller banks.
The bank has one of the highest per branch deposit base with a ratio of around PKR 4 million per branch. Bank’s CASA ratio is around 53% of total deposits of the bank for the year 2011.
The acquisition might be compared with Faysal bank and RBS deal which took place at 0.57 times the book value.