Aug. 12 (Bloomberg) -- MCB Bank Ltd., Pakistan’s biggest lender by market value, agreed to acquire Royal Bank of Scotland Group Plc’s Pakistan unit for about $87 million to increase branches and its expertise in financial transactions.

MCB Bank will buy 1.7 billion shares, or a 99.4 percent stake, at 4.22 rupees apiece before making an offer for the remainder, the company said in a statement to the Karachi Stock Exchange today.

The assets will help MCB tap growth in a nation that forecasts an economic revival for the fiscal year that started July 1. Pakistan’s economy may expand more than 6 percent annually on average over the next five years, Shaukat Tarin, adviser to Prime Minister Syed Yousaf Raza Gilani, said in March.

“MCB has been wanting to get more aggressive in consumer banking; this will allow them to do that,” said Raza Jafri, an analyst at AKD Securities Ltd. in Karachi. “RBS sold at distressed multiples because it wanted to get out.”

RBS, based in Edinburgh, is selling or shutting businesses in two-thirds of the 54 countries in which it operates after posting the biggest loss in British corporate history last year. Australia & New Zealand Banking Group Ltd. agreed to buy its businesses in countries including Singapore on Aug. 4.

MCB Bank’s shares, up 62 percent this year, climbed 2.4 percent to 175.75 rupees at 10:38 a.m. on the Karachi Stock Exchange. RBS Pakistan, which has gained 35 percent during the past month, rose 5 percent, the daily limit, to 22.10 rupees.

Internal Funds

Bank of America Corp.’s Merrill Lynch and KASB Securities Ltd. advised MCB on the transaction. Morgan Stanley advised RBS.

The transaction will be through internally generated resources, MCB said, without providing details.

The purchase of RBS Pakistan, which has 75 branches in 24 cities, will expand MCB’s network of outlets to 1,139, according to the statement. RBS had assets worth 108 billion rupees ($1.3 billion) as of Dec., 31, 2008.

“As a result of this transaction, I am confident that MCB’s position has been strengthened to deliver on our growth plans,” Chairman Mian Muhammad Mansha said in the statement.

Pakistan’s JS Bank Ltd. and Egypt’s Orascom Telecom Holding SAE were also interested in buying RBS Pakistan, according to statements to the stock exchange.

AKD’s Jafri estimated MCB may close as many as 15 RBS branches, which overlap with existing MCB outlets. He also forecast job cuts at RBS Pakistan, saying MCB has an average employee-to-branch ratio of 10, while for RBS it is 20.

There have been eight acquisitions of Pakistani banks since 2002, with the biggest being Standard Chartered Plc’s purchase of Union Bank Ltd. for $487 million in September 2006.

MCB Bank said this week that second-quarter profit rose 1.6 percent to 3.63 billion rupees, or 5.24 rupees a share, from 3.56 billion rupees, or 5.16 rupees, a year earlier.

To contact the reporter on this story: Naween A. Mangi at nmangi1@bloomberg.net]

Last Updated: August 12, 2009 01:01 EDT