HBLs Barclays intentions

Pakistan's largest bank intends to get larger. Habib Bank Limited (HBL), in a notice sent to the KSE has informed of its desire to go for due diligence for Barclays Bank PLC Pakistan. Barclays PLC as a global strategy has decided to move out of few locations, of which its Pakistan operations are one.
Barclays Bank PLC Pakistan (Barclays Pakistan) is a small bank that enjoys a loyal customer base, mostly amongst the corporate elite. Barclays Pakistan has thrived on cross selling and has reported decent profits n the recent past. For HBL to show intention to acquire Barclays Pakistan, looks more a case of cashing in on an opportunity that may yield decent returns at a low price.
In terms of value, Barclays Pakistan would be too small an acquisition to really alter the numbers dramatically. To put into perspective, Barclay Pakistan's asset size is just 3 percent of HBLs. Its advances 2.9 percent, investments 3.7 percent and deposits a mere 2.6 percent, that of HBL.
Barclays Pakistan's branch and corporate banking segments reported losses on net basis in CY13. It was the trading and sales business that was responsible for all profits; in fact it also mitigated losses reported from other segments. Barclays Pakistan's cost rationalization yielded good results, bringing down the cost of funds considerably to 4.38 percent for trading and sales and just 4 percent for branch banking.
High on prudence, non performing loans were never a big issue at Barclays Pakistan, staying at tolerable single digit levels. Nearly two-third of asset composition is from investment in treasury bills, lower NPLs is therefore a just outcome. The banks CASA is worryingly on the lower side, despite improvements, but in the larger scheme of things, it would not alter HBLs CASA significantly.
Lending composition is heavily tilted towards textile, as is the case with most banks, but the ADR is too low, for any potential acquirer to be worrying about it. HBL, on the other hand, derives its strength from retail business, through its strong countrywide presence. Retail banking segment makes 43 percent of HBLs pretax profits.
HBLs own NPLs are well in control and adequately provided for. The cost of fund has been on the slightly higher side, especially for corporate banking segment, but the yields in retail segment more than make up for it. Barclays Pakistan is a small bank, with its branch operations not in the best shape; it would make sense for HBL to make use of Barclays Pakistan's strong clientele and cross selling.
In terms of the larger picture, it would not change much being a smallish proposed acquisition. There are not a lot of synergies one can see out there for HBL to cash on either. Market analysts, at the moment, seem to have no firm opinion on the development yet. It appears a case of a good asset in the market for the taking and HBL has the muscle to do it.