Pakistani branch operations of HSBC Bank Middle East have now merged with and into Meezan Bank.
Subsequently, all customers of HSBC Pakistan will automatically become customers of Meezan Bank.
Earlier on, the State Bank of Pakistan (SBP) sanctioned the scheme of amalgamation of HSBC Pakistan with Meezan Bank following the fulfilment of all regulatory requirements.
An indirect, wholly owned subsidiary of HSBC Holdings, HSBC Pakistan consisted of 10 branches and had total assets of Rs48 billion at the end of 2013.
Meezan Bank has already stated that it intends to make the operations of HSBC Shariah-compliant, while ensuring that the existing customer base continues to receive uninterrupted banking services.
Meezan Bank has the experience of acquiring a foreign bank and converting its operations from conventional to Islamic.
It acquired Societe Generale in Pakistan through a similar transaction in 2002. The Competition Commission of Pakistan also gave its go-ahead to the proposed transaction and issued a no objection certificate in August. The information about the size of the transaction is still not in the public domain.
The sale of HSBC Pakistan is part of a strategy by Europe’s biggest bank to exit from countries where it is unprofitable or lacks scale.
Being the second most populous Muslim country, Pakistan has been a profitable market for Islamic banks. As many as five Islamic banks operate in Pakistan while 14 conventional banks offer Islamic banking services through window operations.
The year-on-year increase in deposits by each of the five Islamic banks in 2013 was in excess of 17%, with Meezan Bank’s deposits rising 25.7% to Rs289.8 billion. According to the half yearly results, Meezan Bank recorded 16.5% growth in its after-tax profit. It increased to Rs2.25 billion in January-June as opposed to Rs1.93 billion that it earned in the corresponding six-month period of 2013.
Like most foreign banks, the clientele of HSBC Pakistan consists mainly of multinational companies with headquarters in European countries.
Whether these multinational companies stick with their current bank after it merges into the country’s largest Islamic banking institution is yet to be seen.
Like HSBC, Europe-based Barclays Bank is also leaving the Pakistan market for good.
Recently, Habib Bank announced that it was negotiating with Barclays Bank for the acquisition of its Pakistan operations.
