MCB Bank would soon pick Merrill Lynch Co, or Goldman Sachs Group Inc, to advise the lender to sell as much as $100 million worth of Global Depository Receipts in first quarter of the new fiscal year, it would be the first bank to sell GDRs. The bank is planning to raise $100m from the sale, and is considering to appoint Merrill Lynch & Co and Goldman Sachs Group Inc for that purpose.
In order to strengthen its position in the domestic market and to expand its deposit base, the bank is also eyeing the acquisition of a small domestic bank. The acquisition would allow the bank to further increase its market share in the local banking industry, as the industry moves towards consolidation.
In addition, the bank is also planning to aggressively expand its branch network, from the current level of 960 to around 1200. The increase in branch network also includes opening of several overseas branches in regions like Toronto, Kabul, Dubai and Mumbai. These branches will allow the bank to capture trade and remittances business.
MCB Bank, which is regarded as the fourth largest bank in terms of earning assets in the country (5-year historical CAGR: 12 percent; 5-year prospective CAGR: 16 percent) would reach overseas investors through offering of GDR. As per preliminary estimations, a special purpose vehicle (SPV) is likely to be formed, which would continue to hold these shares against the issuance of the GDR and at the time of maturity these share would again come back to MCB.
In this respect, MCB Bank also plans to shut down some of its local low performing branches and wants to open new branches at high growth areas of the world such as the UAE. This ostensibly provides them an opportunity to handle huge chunk of workers remittances, which is usually considered as the domain of National Bank of Pakistan (NBP), the country''''s largest bank.
The bank is setting an ambitious target of 150,00 customers in one-year time frame.
However, on the conservative side, Faisal Shaji, head of research at Capital One Equities said: "we have incorporated the figure of 30,000 in our financial model up to CY06, due to the fact that the impending issuance is coming in the middle of the calendar year."
Currently the bank maintains a market share of 10 percent of the industry deposits: "however, our preliminary assumptions depict that due to the above impending expansion plans, the size of the deposit base can increase. That is with a 5-year CAGR of 19 percent, as we expect the deposit base of the bank to go as high as 506 billion at the end of CY08 (CY05: Rs 229 billion), enunciating nearly 11.5 percent of the market share of the industry. This however helps the bank in maintaining risky lending base (5-year CAGR: 20%) assuming a conservative ADR of 65 percent."