RBS up for sale in Pakistan

[LahoreEstate]

RBS up for sale in Pakistan



Friday, February 27, 2009
By Saad Hasan

KARACHI: As the Royal Bank of Scotland (RBS) on Thursday announced the worst financial loss in British history its office here disclosed the operations in Pakistan are being sold.

In a statement released to the Karachi Stock Exchange (KSE), the bank said there are potential buyers who have expressed interest in its business, which includes the retail and commercial banking segments.

“Current capital constraints on the RBS Group and the need for RBS to reduce the size of its balance sheet means it is unable to provide the investment the business in Pakistan requires to achieve its growth potential,” it said.

The bank neither divulged any details pertaining to potential buyers nor did it say anything about the fate of its employees here.

The RBS exit comes at a time when it was in the process of reorganising the business of ABN AMRO, which it bought at peak of the global financial crisis in 2007.

There were doubts when it started re-branding the 80 branches of ABN AMRO in Pakistan amid deteriorating economic and political situation, industry people say.

“It is only logical for RBS to give up operations in Pakistan,” said an official of another multinational bank. “They came because this country was part of the deal. RBS decision is caused by global reasons but the situation here will make head office of any multinational bank sceptical.”

Economic decline will further pull down profit growth of the banking industry this year and next, as people borrow and deposit less in banks, a banking analyst said.

“Banks are parking their funds in treasury bills as they fear rise in non-performing loans and cut back on lending,” said Farhan Rizvi, an analyst with JS Research. “Industry is in a consolidation phase and there will be mergers and takeovers this year.”

But, he said, it is unlikely that a new foreign bank will come forward to buy RBS in Pakistan at a time when there is financial turmoil in international markets.

And, he said any consortium formed locally to take over RBS would have to be very strong financially. “We are talking about 80-plus branches and over Rs112 billion in assets.”

The chances of RBS being purchased by any foreign bank, which is already operating in Pakistan, are also slim, said A B. Shahid, a banker and commentator.

“With the prevailing political instability and security concerns, it is very unlikely,” he said. “It is unfortunate the turmoil continues and our politicians aren’t able to see the severity of the situation.”

While their role as financial intermediaries is limited, industry people say, foreign banks have brought modern banking practices and products to Pakistan.

http://www.thenews.com.pk/daily_detail.asp?id=164694