MERGER, ACQUISITION

AND CORPORATE
RESTRUCTURING
Faysal Bank acquires RBS Pakistan
Presented to: Prof. Imad-ud-Din
Presented By:

Irfan Haider

Haseeb-ur-Rehman

Omer Ejaz
Introduction
Merger and Acquisition

Royal Bank of Scotland

Faysal Bank
Merger & Acquisition
Mergers and acquisitions are the part and parcel of every field, especially in
banking industry. This research is focused on the performance of mergers in the
last decade. As evident from recent past the banking industry in Pakistan has to
cop with many mergers. Mergers are not opted only for the sake of
synergy and economic benefits but there are certain other reasons. In Pakistan
the other stimulant is the State Bank of Pakistans capital requirement, which is
being raised with the passage of time. This study has analyzed the
performance of 6 mergers (Prime and ABN AMRO, ABN AMRO and Royal Bank
of Scotland, RBS and Faysal Bank, Saudi Pak Commercial Bank and Silk
Bank, Union Bank and Standard Chartered Bank and Cres and Samba
Bank), occurred in the last decade in Pakistan banking industry

The phrase mergers and acquisitions (abbreviated M&A) refer to the
aspect of corporate strategy, corporate finance and management dealing with
the buying, selling and combining of different companies that can aid, finance, or
help a growing company in a given industry grow rapidly, without having
to create another new business entity.






































Royal Bank of Scotland

The Royal Bank of Scotland is one of the retail banking subsidiaries of
the Royal Bank of Scotland Group, and together with some other local
banks, provides branch banking facilities throughout the British Isles in
addition to having a global reach in many other countries. When RBS
entered Pakistan it developed local knowledge and combined it with
global expertise and financial strength and strived to deliver value to
Pakistani customer. RBS had offices in all major cities including Karachi,
Lahore, Islamabad and Rawalpindi and a significant presence in the
Pakistani market. It claimed to focus on providing personal and business
banking services as well as building extensive relationships with
corporate and financial institutions.



Services
Financial markets

Transaction banking

Financial advisory

Mergers and acquisitions


Faysal Bank
Faysal bank limited started its operations in Pakistan on October 3,
1994 as a public limited company under the companys ordinance
1984. Currently Faysal bank has its shares listed on Karachi,
Lahore and Islamabad stock exchange and is actively handling its
operations in these cities. It is engaged in customer, commercial,
corporate and Islamic banking activities. The bank has a bright
future and has a long term credit rating of AA and a short term
rating as A1+ as determined by Pakistan credit rating agency
limited (PACRA) and JCR-VIS credit rating company. Faysal bank
strives to achieve excellence in whatever they do and are working
towards achieving leadership in providing financial services in
chosen markets through innovation.


Services
Deposit products
Consumer lending
Retail services
Corporate and banking services
Islamic banking
Priority banking

Acquisition of RBS by Faysal
Bank
RBS had a merger with the Dutch bank ABN Amro a few years back, but that too did
not help much in supporting and firming the shaky financial condition of the bank,
and thus the subsequent downfall of the bank led to the decision of the management
at RBS to end their operations in Asia by withdrawing their business in the retail and
commercial sectors.

Later, Faysal bank limited took over the controlling interests in the Pakistan
operations of Royal Bank of Scotland Limited (RBS Pakistan), from the RBS Group
for Euro 41 million which culminates in a share price of 2.5. In local currency this
amount stands at 4.298 billion. This acquisition has extended and rooted Faysal
Banks hold to over 200 branches, with combined business assets of over 260 billion,
strengthening its balance sheet and improving its position amongst its competitor in
the market. The merger of RBS Pakistan into Faysal Bank Limited was completed by
January, 2011 thereby achieving a significant milestone in its growth strategy. RBS
had 1,717,981,931 ordinary shares listed on the Karachi stock exchange, Lahore
stock exchange and Islamabad stock exchange which are now owned by Faysal
bank.
Obvious Advantages

According to the analysts there were two main reasons behind this
merger for the management at Faysal Bank, first was to increase its
market share, and the second to develop themselves as the
providers of premium banking products. Also the motivation of
becoming the 10
th
biggest bank of the country and the obvious
probability of Faysal Bank getting larger than Bank Al Habib and
Askari Bank.
Another reason was also that the brand equity of the bank is quite
large and the brand itself, RBS is a plus point, as it is globally well
recognized. The acquisition also helped Faysal bank in acquiring
the some of the best human capital in Pakistan in terms of banking
talent.

Acquisition and the after
Effects

In one of the recent statements to the media, Naved A Khan, President &
CEO Faysal Bank Limited said: The acquisition is a significant milestone in
Faysal Banks strategy to expand its presence and commitment to
Pakistan, whilst offering a wider range of products across all business
segments, with continued focus on improving customer experience. This
expansion has resulted in positioning the bank as one of the key players in
the financial sector, which is undergoing consolidation. The bank remains
committed to all its stakeholders, customer and employees, while
continuing to fulfill its corporate responsibilities.

At another place Syed Naseem Ahmed, Chairman Faysal Bank Limited
said: This acquisition significantly complemented our ambitious growth
plans. We will ensure that we optimize on the opportunities arising from this
acquisition through providing the necessary support, investment and
resources to the management of the bank with time further.

Ratios and Quantitative
Analysis
Ratio analysis, being a time-tested technique, is most frequently employed in
all financial decision-making processes.
There is a clear decrease in the profits and the net income of the bank; this is
due to the decision of the bank to acquire the RBS. According to the Bahrain
parent company Ithmaar, the finances for the acquisition were to be arranged
by local operations and capital reserves of Faysal bank here in Pakistan. The
effect of the acquisition in the short-term with the help of the ratios, is that it
seems as if the financial health of the bank has weakened, though the high
rate of taxes along with the high rate of inflation and the market condition
itself which is going through a slump nowadays, also has played a very
important part in the current operative conditions of the bank. Also the reason
for the decline in the ratios and resultantly the financial health of F.B is due to
the increase in operating expenses attributed to operations of RBS. After
excluding administrative expenses of Rs. 1,251 million relating to RBS
operations, administrative expenses increased by Rs. 300 million primarily on
account of general inflation, salary increments and IT related expenses.
Conclusion




As the ratios and the financial analysis of the
bank for this quarter compared to the last
quarter same year shows that there has been a
decrease in the overall net profit in the short
term, but the addition of the assets and the
huge customer base of the RBS will benefit the
company in the long run, and thus the
company is sure to recover and come back to
a healthy recovery in the future.