MCB Bank agrees to acquire RBS operations in Pakistan for US$87 million

According to people familiar with the situation, MCB Bank Ltd., Pakistan's largest privately-owned bank by assets, has agreed to buy Royal Bank of Scotland Group PLC's operations in Pakistan for PKR7.2 billion (US$87 million) in the latest sale of Asian assets by the Scotland-based bank. Earlier in the day, MCB Bank said in a statement to the Karachi Stock Exchange that its board had approved a proposal to acquire the assets, but didn't give any details other than to say the deal is subject to the signing of a share-purchase agreement and approvals from the State Bank of Pakistan and other regulators.

The MCB is paying 0.73 times the book value of about PKR9.89 billion at the end of March of RBS's Pakistan assets. Besides MCB Bank, Habib Bank Ltd. (HBL.KA), Egypt's Orascom Telecom Holdings (ORTE.CI) and local JS Group had professed interested in buying the assets earlier. In April, Royal Bank of Scotland said Pakistan's central bank had allowed MCB and local bank Habib Bank to begin due diligence on its operations in the country.

Bank of America Merrill Lynch and KASB Bank advised MCB on the deal. A person familiar with the situation said that MCB, which will see its extensive network expanded with RBS's assets, will finance the acquisition with its own internal capital. He said an official announcement of the deal is due within 24 hours. "The buyout is beneficial for MCB Bank as RBS has an extensive consumer base," said Mohammed Imran, head of research of First Capital Securities Ltd.

The sale of its Pakistan assets is a part of a three- to five-year plan in unwinding RBS's partial acquisition of ABN AMRO. The US$101 billion, peak-of-the-market purchase of the Dutch bank spearheaded by RBS and is widely seen as the strategic misstep that led to RBS's downfall and the ouster of former chief executive Fred Goodwin.

70%-owned by the U.K. government RBS said earlier this year that it planned to sell its Asian retail banking assets as part of moves to shed its non-core assets. In addition, Australia & New Zealand Banking Group Ltd. declared last week it was buying the bulk of RBS's Asian banking operations for US$550 million leaving just the Scottish bank's Indian, Chinese and Malaysian assets still on the sale block.