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KARACHI: The State Bank on Tuesday said that it has not given permission to any party for due diligence of ‘Hongkong and Shanghai Banking Corporation’ (HSBC), Pakistan operations so far.
HSBC has recently expressed intension to sell off its Pakistan business and approached the State Bank with a few names as possible buyers, it has been reported.
Many foreign banks, that entered Pakistan last decade and boosted the banking industry, started limiting their operations or selling off their operations in Pakistan.
This was the direct outcome of the global financial crisis which crippled many banking giant in US and Europe while earlier they were termed as too big to fail.
Though the banking in Pakistan is still profitable but the economy has been on decline since 2007 offering limited scope for the foreign investors eyeing growing economies like India and China.
A top banker said the HSBC move is a bad omen for the banking industry in Pakistan as more foreign banks may opt to close their operations in this country.
The banker said that few top Pakistani banks had grabbed most of the banking industry while the foreign banks under the prevailing deteriorating law and order situation with ailing economy see little chance to grow.“I know some Pakistani banks are eager to buy HSBC business which will further enhance their share in the local banking industry but it will send very wrong message to the outer world,” said a senior banker working for another European bank fearing that his bank may also opt to leave the country if this trend continues.
Reuters adds: Europe’s biggest bank, HSBC, is in talks to sell up in Pakistan and offload retail banking in Korea, part of its withdrawal from countries where it lacks scale or struggles to make a profit.
HSBC said it was discussing the sale of its Korean retail and wealth management business to Korea Development Bank (KDB), but would keep its investment banking and corporate banking businesses in the country.
It is also in talks with several unnamed companies to sell its Pakistan business, it said in a separate statement.
HSBC did not give a price for either deal, but both are modest in size. It has 11 branches in Korea and assets of about 30,000 billion Korean won ($26.4 billion), and 10 branches in Pakistan.
If completed, the deals would take the number carried out by HSBC Chief Executive Stuart Gulliver since taking over early last year to 25, as he tries to revive his bank by cutting costs and boosting profitability. Deals already struck will cut $50 billion in risk-weighted assets from its balance sheet since early 2011.
The London-based bank operates in 85 countries and Gulliver is trying to sharpen its focus on fast-growing Asian markets, while businesses that lack scale in Asia could also be on the block.
It made a $22 billion profit last year, the largest by a western bank, but costs continue to rise and its return on equity was 10.9 per cent, short of its 12-15 per cent target.
HSBC has this year sold its general insurance businesses for $914 million, sold operations in Costa Rica, El Salvador and Honduras for around $800 million, and said it would quit Slovakia. It is also considering selling some Mauritius units.
