Karachi: Habib Bank Ltd, Pakistan’s largest by branches, plans to sell shares locally and overseas this year to help grow its network in China, Central Asia and East Africa.
The Pakistan government will sell at least 10% in the bank through an initial public offering (IPO) within the next three months and list global depositary receipts in Hong Kong or London by December, said Habib Bank president Zakir Mahmood.
“The government is close to hiring a financial adviser for the share sale,” said Mahmood, 55. “Hong Kong could be a very strong contender for the GDR listing because Asia is a huge growth story with a lot of surplus liquidity.”
Habib Bank joins rivals such as MCB Bank Ltd, National Bank of Pakistan and United Bank Ltd in seeking international funds. An economy forecast to expand 7% in the year to 30 June, up from 6.6% in the previous 12 months, has helped make Pakistani bank shares more attractive.
“If the pricing for Habib Bank’s shares is in line with the other GDRs, it should get a positive response,” said Abdul Aziz Anis, who oversees one billion Pakistani rupees (Rs6,900 crore) in stocks and bonds as chief executive of Karachi-based Alfalah GHP Investment Management Ltd.
The benchmark Karachi Stock Exchange 100 index rose 20% this year to a 12-month high on 18 April. Merrill Lynch & Co. chief Asian strategist Mark Matthews described Pakistan as his “favorite market in Asia” on 19 April.
Habib Bank plans to open as many as 12 international branches by the end of 2008, including outlets in Bangladesh, Turkey and Tajikistan, Mahmood said. The bank’s international operations account for 15% of revenue at present.
Habib Bank has applied for a licence to open an office in India to take advantage of a diplomatic thaw between the neighbours. Relations with India have “never been better,” Pakistan’s President Pervez Musharraf said on 16 April.
Mahmood also hopes this year to buy a 20% stake in Urumqi City Commercial Bank, one of the largest in China’s western-most province of Xinjiang, to help tap growing investment and trade ties between China and Pakistan.
China and Pakistan plan to triple bilateral trade to $15 billion (Rs63,000 crore) in five years by encouraging ties between companies in the two countries, Pakistan’s Prime Minister Shaukat Aziz told reporters on 17 April.
Habib Bank has also applied to set up a subsidiary in Canada, where there were almost one million South Asian expatriates in 2001, according to a government census.
“The global strategy is helping to diversify Habib Bank’s revenue streams and that will make investors more comfortable,” Anis said. “Competition in banking is getting intense and any bank caught sleeping will be a loser,” he added.
Habib Bank is also “close to finalizing” the purchase of a minority stake in the Kyrgyz Investment & Credit Bank in Bishkek, Kyrgyzstan.In January, Habib Bank bought a 4% stake in Diamond Trust Bank Kenya Ltd, for $5 million.
The Geneva-based Aga Khan Foundation, which bought a 51% stake in Habib Bank for $390 million in 2004, also owns stakes in Nairobi-based Diamond Trust Bank and the Kyrgyz bank.
“Internationally, we have particular interest in the emerging markets like East Africa where we anticipate a lot of growth and would like to participate in it,” Mahmood said. Habib Bank, with Pak Rs563 billion of assets, has the largest branch network of any Pakistani bank, with 1,437 domestic and 55 international outlets.
The bank’s net income of Pak Rs14.28 billion in 2006 compares with Rs493 million in 2000, when Mahmood took the helm after 23 years at Bank of America Corp. and Credit Agricole Indosuez.
The bank expects most of its domestic growth will come from consumer loans, which will account for 30% of lending in five years, from 11% today, led by mortgages and credit cards, Mahmood said.
The bank also plans to open 10 Islamic banking branches across five cities in Pakistan this year, he said. The bank already has two such branches in Karachi.
Assets held by banks that comply with Islamic law grew to Pak Rs95 billion at the end of September from Rs50.65 billion as of 30 June, according to central bank data.