Merger of NIB, MCB bank approved

KARACHI - MCB Bank (MCB) on Wednesday approved its merger with NIB Bank through an acquisition of the latter’s majority stake under a share swap arrangement from Singapore-based Temasek.

The amalgamation deal is subject to a number of regulatory approvals.

“The committee of the board of directors of MCB, at its meeting, approved and recommended the scheme of amalgamation of NIB with and into MCB by way of merger of NIB with and into MCB through a share swap arrangement,” the MCB said in a notice issued to the Pakistan Stock Exchange.

“The committee has also approved the swap ratio of one new ordinary share of MCB for every 140.043 shares of NIB for the scheme of amalgamation.” The merger is subject to approvals from the shareholders, State Bank of Pakistan (SBP) and Competition Commission of Pakistan.

The above decisions of the committee are subject to the approval of the shareholders of MCB Bank in their meeting, sanction of the State Bank of Pakistan, approval of the Competition Commission of Pakistan and receipt of other requisite regulatory authorities, consents and approvals.

NIB Bank's total deposits currently stand at Rs 118 billion, which is 16 percent of MCB Bank's total deposits. This will take total deposits of MCB to Rs 887 billion. The number of branches of MCB Bank will increase by 171 branches to 1,395 branches. Alongside the usual synergies post merger of the banks, MCB Bank could also benefit from the deferred tax assets of Rs 9 billion (Rs 7.5/share), lying on the books of NIB Bank that could be used to reduce future tax liability of the bank, Business recorder said.

MCB Bank also plans to use its experience to recover NPLs on the books of NIB. NPLs of NIB bank currently stand at Rs 27 billion with a gross loss ratio of 22 percent, considerably higher than industry average. "We can continue to see a further consolidation in the banking sector going forward as smaller banks face difficulty in meeting capital requirement set by the central bank as per the Basel III regulations," an analyst at Topline Securities said.