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MCB Ltd formerly known as Muslim Commercial Bank Limited was incorporated by the Adamjee Group on July 9, 1947, under the Indian Companies Act, VII of 1913 as a limited company. The bank was established with a view to provide banking facilities to the business community of the South Asia. The bank was nationalized in 1974 during the government of Zulfikar Ali Bhutto. This was the first bank to privatized in 1991 and the bank was purchased by a consortium of distinguished Pakistani corporate groups led by Nishat Group. As of June 2008, the Nishat Group owns a majority stake in the bank. The president of the bank is Mr. Atif Bajwa (previously with Citibank). Founded in 1948, Nishat Group is one of the leading and most diversified business groups in Pakistan. The group has strong presence in the most important business sectors of the country such as banking, textile, cement and insurance.

Mian Mohammad Mansha is the Chairman of the group (and also MCB) and has played instrumental role in its success. In recognition of Mr. Mansha’s contribution, the Government of Pakistan has conferred him with "Sitara-e-Imtiaz", one of the most prestigious civil awards of the country.

MCB is Pakistan’s fourth largest bank by assets having an asset base of US$6.7 billion, and the largest by market capitalization having a market capitalization of US$4.1 billion. The Bank has a customer base of approximately 4 million and a nationwide distribution network of 1,026 branches, including 8 Islamic banking branches, and over 300 ATMs, in a market with a population of 160 million.

History

In 2007, MCB reported a profit after tax of PKR16.4 billion (US$270 million) and generated a return on average equity of 38% and a net interest margin of 8.08%. The Bank’s asset quality is strong with a gross NPL ratio of 4.7% and provision coverage of 100%.

During the last fifteen years, the Bank has concentrated on growth through improving service quality, investment in technology and people, utilizing its extensive branch network, developing a large and stable deposit base and managing its non-performing loans via improved risk management processes.

In 2005, the management of the bank changed its name from Muslim Commercial Bank Limited to MCB Bank Limited (MCB). The reason was to explore international markets as they were facing resistance specially from Western Countries to avail license. In 2008 the head office of MCB was shifted to Lahore in a newly constructed building, namely MCB House, located at Sharea Ghous-ul-Azam (formerly known as Jail Road) from Karachi.

The MCB Towermarker in Karachimarker serves as the MCB's headquarters, and is also the tallest building in Pakistanmarker. MCB, advised by Merrill Lynch, became the fourth Pakistanimarker company (the other three being Hubco, PTCL and Chakwal Cement - they all have been delisted) to list on the London Stock Exchange when it raised US$150 million global depositary receipts.

In May 2008 Malaysian bank, Maybank and MCB sponsors Nishat Group signed an agreement, whereby Maybank will acquire up to 20% of the ordinary shares in MCB from Nishat Group. The acquisition is in-line with Maybank’s strategy, as Malaysia’s financial services leader in the region, to build its presence in key growth markets across the region. It also paves the way for MCB, one of Pakistan’s premier financial services groups, to engage Maybank as its exclusive foreign commercial bank strategic partner.

Maybank initially acquired from Nishat Group 94,241,527 ordinary shares in MCB, representing a 15% stake in the Bank, for a cash price of PKR470 per share. The total consideration paid was approximately US$686 million. The purchase price represented a 11.4% premium to MCB’s closing share price of PKR 422 on May 2, 2008, and a premium of 12.9% to the average closing share price for MCB over the 30 trading days immediately preceding the date of this announcement.

Based on MCB’s December 31, 2007 audited book value, the purchase price represents an implied price to book value multiple of 5.13x, a price to 2007 earnings multiple of 18.0x and a price to 2008 earnings multiple of 15.2x. In July 2008 Maybank exercised its right to increase its stake to 20%.

The stake in MCB allows Maybank the right to appoint two Directors to represent its interest on the Board of MCB. One of these Directors was to be appointed immediately and the second Director will be appointed upon completion of the term of the existing Board, scheduled to be on March 27, 2009.

As part of the transaction, Maybank and MCB are also expected to enter into a business cooperation arrangement which will include, among others, Islamic banking, retail banking, credit cards, asset management and SME banking. Leveraging Maybank’s leadership and experience in these segments coupled with MCB’s brand and broad distribution network, Maybank and MCB believe that significant revenue synergies can be attained. Both Maybank and MCB are also expected to benefit from increased business ties and trade flows between Pakistan and Malaysia.

MCB buys RBS Pakistan

The MCB announced the signing of the agreement while the RBS said it had reached an agreement, in principle, for sale of its 99.37 per cent holding.

The shares of RBS got the lowest price as compared to previous deals made during the last six years in the country.

The MCB will acquire 1.707 billion (1,707,107,891) ordinary shares for a cash price of Rs4.22 per share. The MCB succeeded to strike the deal at the lowest price.

In the previous deals, the Union Bank was sold at a price of Rs93 per share while Prime Bank was acquired by ABN AMRO (Now RBS Pakistan) at the rate of Rs54 per share, PICIC DFI got Rs78 per share, Saudi Pak Bank got Rs29.3 per share and MCB Bank sold its shares at a price of Rs470 per share to May Bankmarker, Malaysiamarker.

The total consideration to be paid will be Rs7.2 billion (US$87 million). In addition, the MCB would make a tender offer for the remaining 0.63 per cent of ordinary shares not owned by the majority shareholder.

‘We are delighted to confirm today that we have successfully entered into a sale agreement with the MCB for RBS Pakistan which comprises Retail, Commercial, Islamic and onshore GBM (Global Banking and Markets) and GTS (Global Transaction Services) businesses in Pakistan,’ said Mohammad Aurangzeb, chairman of RBS Pakistan.

RBS Pakistan is a leading international bank in Pakistan with a branch network of over 75 in 24 cities, of which 30 serve the affluent retail customer segment and three are Islamic banking branches, and has over 90 ATMs. On Dec 31, 2008, RBS Pakistan had total assets of Rs108 billion.

As a result of the transaction, based on latest available pro forma numbers the total number of branches of combined MCB and acquired bank (RBS Pakistan) will increase to 1,139, the total consolidated deposits would increase to Rs413 billion and consolidated gross advances to Rs324 billion.

‘The RBS acquisition will be crucial in providing access to important customers, in making available a strong human resource pool as well as an evolved product development and technology infrastructure. We are convinced that this transaction will be beneficial to all stakeholders,’ said Atif Bajwa, President, MCB Bank.

He said that the MCB is looking to play an increasingly progressive role in economy by providing innovative and value-added products and services to a diverse customer base.

The MCB struck the deal at a time when banking in the country is not in good shape while the global banking system is facing complicated problems which forced giant European and American banks to either seek government help to come out from the continued heavy losses or closed down their operations.

This agreement with MCB follows the completion of the strategic review and the announcement on Feb 26, 2009, that the RBS was to dispose of its retail and commercial businesses across Asia along with the decision to exit its wholesale banking businesses in Vietnam, the Philippines, Taiwan (except the Securities business) and Pakistan in an effort to refocus the group’s geographic reach across a smaller number of key markets.

In its Asia operations, RBS Pakistan has the largest branch network while on the basis of customers it ranks number fifth which is mainly due to lower penetration of banks in Pakistan.

In London, the RBS said on Wednesday it is to sell its Pakistan division to MCB Bank for $87 million (62 million euros), says AFP.

The Royal Bank of Scotland Group plc has reached agreement in principle for the sale of its 99.37 per cent holding in The Royal Bank of Scotland Limited (RBS Pakistan) to MCB Bank Limited (MCB) for a total consideration of $87 million,’ the group said in a statement.

The deal was expected to be completed in the final quarter of 2009 subject to regulatory approval, it added.

The announcement comes one week after RBS said it would sell a chunk of its Asian operations to Australia and New Zealand Banking Group for 418 million US dollars.

RBS is 70 per cent owned by the state after a massive bailout from the British government last year amid the global financial crisis.

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