MCB Bank is trying to rapidly expand its operations through the acquisition of SME Bank in the future.
The management of the MCB Bank was quick to respond to an offer by the incumbent government which recently advertised to sell off substantial shares (93.88%) of SME Bank to a strategic buyer.
In this regard, MCB Bank has approached the Privatization Commission showing its interest to acquire SME Bank through an expression of interest, according to the notification issued by the bank to its shareholders on the Pakistan Stock Exchange. Consequently, the bank succeeded in the first step and received a request for a statement of qualification issued by the Privatization Commission towards the proposed transaction.
The bank has entered a crucial phase as it has submitted a statement of qualification to the privatization commission. It has become a competitive potential buyer of SME Bank, being the first and only known banking company so far in the race. There are some more banks and investors are expected soon.
MCB Bank’s Strength
MCB is a prominent bank that is likely to stir up the privatization process of SME Bank. The potential acquirer is not only strong in terms of its balance sheet but it has made its distinguished position in the banking sector known after the merger of NIB Bank back in 2017 and setting up a subsidiary of the Islamic Bank.
The bank has recently winded up its subsidiary to get rid of loss-making entities focusing completely on the banking businesses.
Being the most profitable private bank, MCB cannot only merge the operations of SME Bank but it can run the same bank as its subsidiary independently once it acquires the strategic shares in the bank.
SME Bank and Opportunities
SME Bank is the public sector bank with huge liabilities, low-profile leadership, a lack of vision from the major shareholder, that is, the government to uplift the company in profit. The bank along with First Women Bank has been put on a list to get privatized by previous governments yet it was not on the priority list.
Last time in 2017, the bank caught the attention of five investors who also submitted the statement of qualification but only two financial institutions—FINCA Microfinance Bank and Saudi Pak Investment inched up towards a process of due diligence of the bank. Hence, the privatization of the bank has been postponed to the recommendation of the Privatization Commission and State Bank of Pakistan.
The bank has been in the deep losses of over Rs. 550 million struggling with a shortfall of paid-up capital and other regulatory requirements of the banking regulator, which have hampered the growth of the bank in any direction.
SME Bank has been a specialized institution as its name implies. It was established to exclusively cater to the needs of the SME sector that could help stimulate the development of small and medium-sized businesses though there has been always a lack of policy at the national level.
In the past couple of years, the State Bank of Pakistan came up with the aggressive SME financing policy to enhance the facility up to Rs. 1 trillion to this particular section in the country. Last year, it touched a mark of Rs. 500 billion first time in the history showing immense potential in the areas of business despite high-interest rates.
SME Bank, if it is acquired to run an independent, may streamline its operations in a few years. It may be merged by a successful acquirer within its operations to scale up its operations through its assets and network.
The SME Bank was formed and incorporated as a public limited company under the Companies Ordinance 1984. The Government of Pakistan is the major shareholder of the bank. As part of the financial sector restructuring program of the Government of Pakistan, Regional Development Finance Corporation (RDFC) and small Business Finance Corporation (SBFC) were amalgamated into SME Bank Ltd effective January 1, 2002.