MCB Bank Plans Expansion in Pakistan, Abroad, Ignoring Domestic Slowdown

[ajpirzada]

MCB Bank Ltd., Pakistan’s largest lender by market value, plans to expand overseas and add branches and employees at home even as economic growth slows after the worst floods in the nation’s history.

The lender will add 70 outlets in its home market and increase staff as it expands trade financing, remittances management and mobile-banking operations, Chief Executive Officer Mohammad Usman Ali Usmani, 68, said in an interview in Karachi yesterday. MCB may open branches in China, the Middle East, Europe, Singapore and Indonesia if it gets regulatory approvals, he said.

The investments may bolster MCB’s lead over rivals struggling to fend off profit declines as credit growth stalls in an economy forecast to expand 2.5 percent in the year ending June 30, missing the government’s initial target of 4.5 percent. Usmani, who took the helm at MCB in June, forecasts his bank’s profit will climb as much as 8 percent in 2011 while the nation’s lenders on average post a drop of as much as 7 percent.

“MCB has been known for its aggressive investment strategy and capital strength,” said Mustufa Bilwani, a research analyst at JS Global Capital Ltd. in Karachi who rates MCB as a “hold.” “ It’s always good to invest during a downturn.”

Shares of MCB rose 0.1 percent to 223.20 rupees at 9:55 a.m. on the Karachi Stock Exchange. The stock has advanced 12 percent this year, compared with a 26 percent gain in Pakistan’s benchmark Karachi Stock Exchange 100 Index.

Surplus Funds

Only half of MCB’s 500 billion rupees ($5.8 billion) in capital has been deployed, and deposits are climbing at about 15 percent a year amid a slump in demand for loans, leaving the bank with surplus cash, Usmani said. The lender will aim to reduce its cost of funds from about 4 percent, he said.

Pakistan’s central bank last month raised its benchmark rate for the third time since July to stem the most inflation in Asia. Credit growth in the nation slowed to 2.2 percent this year as of Dec. 10, compared with 18.3 percent for the same period of 2008, according to central bank data.

National Bank of Pakistan, the country’s biggest lender by assets, and local rivals may post a 10 percent profit drop next year as higher interest rates curb loan demand and the economy falters, Chairman Syed Ali Raza said in an interview this week.

MCB is considering buying Abu Dhabi Group’s 21 percent stake in Pakistan’s United Bank Ltd., the nation’s third-biggest lender, because of its potential dividend returns, Usmani said. Abu Dhabi Group on Dec. 15 said it contacted buyers to gauge their interest in buying its stake.

To contact the reporter on this story: Farhan Sharif in Karachi, Pakistan at Fsharif2@bloomberg.net.

To contact the editor responsible for this story: Philip Lagerkranser at lagerkranser@bloomberg.net.

 

[AZADPAKISTAN2009]

Great new but I hope we will avoid cases of taking loans and then loan forgiveness mostly abused by the politicians

 

[somebozo]

The flood as served as the pivot point of changing Pakistani politics..new dev project will come in and more importantly talks are in progress to curb feudalism and tribalism. Even some hardcore Baluchistan and Sindhi tribal lords are considering education, electricity and reforms for their villages.

 

[TechLahore]

This is wonderful news. MCB under Mian Mansha really has the potential for becoming a true multinational bank. It already has a foreign presence, but this article envisages the kind of international expansion one would really like to see MCB undertake.

Razzak Dawood's Descon now employs far more people internationally than in Pakistan and has hence transcended being a large local company to really becoming a multinational with a Pakistani identity. MCB can play an even bigger role.

Really excited to see how these businesses grow over the next few years. Given their track record, I would expect them to perform in a stellar fashion.

 

[Zulfiqar]

Well i attest to the fact that MCB has hired many people recently. 400 graduates/MBAs from all over Pakistan, including me .

However, some of their HR policies are not so great. Their salaries are low as compared to other banks and annual increase in salary is not so great. . I hope that they increase our salaries too. Many new people were hired as oldies (from the 70s-80s era will retire soon).

However, they have very good long term benefits (their provident fund gives you a return of around 40% per year IIRC (however i am not sure about present profit rates as i am new there). Job security is also there which is a plus.

One of the reasons that they are so profitable is that they pay low profit on their deposits (per year) as compared to other banks. Their current account deposits are also pretty big (which costs them nothing as they don't have to pay interest on those accounts).

MCB recently tried to acquire RBS Pakistan but SBP denied it and now another smaller bank will get it. Lets see what happens with the UBL investment. They were denied entry into european markets partly because of its name (Its not muslim commercial bank anymore,its now called MCB bank)

I have to stick around with this bank for around 3 years (because of my bond/minimum service contract). Then i will decide on what to do next (keeping in mind the economic conditions and the job market).