JS Bank Ltd., the Pakistani lender that is buying HSBC Holdings Plc’s local unit, expects net income to double this year and again in 2013, paving the way for the first dividend payment to shareholders next year.
“We can double in size overnight if we retain all of the business from HSBC,” Chief Executive Officer Kalim-ur-Rahman said in an interview in Karachi yesterday. “We hope to retain 75 percent of HSBC’s loans and deposits by keeping their staff and branches.”
JS Bank, which has expanded its network since its creation less than six years ago to 155 branches, plans to increase it to 250 by 2014 and add overseas offices, Rahman said. The lender’s shares have more than tripled this year after it returned to profit and reduced provisions for bad loans.
“Their biggest challenge will be to retain HSBC’s foreign clientele of multinational companies,” Raza Jafri, an analyst with AKD Securities Ltd. in Karachi, said by phone. “The acquisition will add prestige to the JS brand name, which in turn will help them to make more clients.”
JS Bank may make a rights offer, a sale of stock to current shareholders, after approval by the board at a meeting scheduled for Oct. 12, said Rahman, 69, who has been CEO for two years. The issue may be priced at 10 rupees a share, he said.
Shares of JS Bank rose 3.4 percent to 5.47 rupees as of 9:34 a.m. local time in Karachi trading. The company’s threefold gain this year compares with a 39 percent increase in the benchmark KSE100 Index. Rahman said the shares may climb to 10 rupees within 12 months because of the acquisition, which is subject to regulatory approval.
The stock has been propelled by a decline in provisions for bad loans in 2011, said Hamad Aslam, head of research at Lakson Investments Ltd. in Karachi. Banks’ provision expenses rose in 2009 and 2010 because of higher loan losses.
Pakistan’s central bank may approve the HSBC acquisition next week and the transaction is scheduled to be completed by the end of the year, Rahman said, without giving a price for the purchase. JS Bank plans to introduce credit cards and cash management services this year, and will offer HSBC customers stock brokerage and investment management services through the JS Group in a bid to retain them, he said.
HSBC unveiled the sale last month. CEO Stuart Gulliver is offloading assets in countries from Costa Rica to Thailand as he seeks to cut costs by $2.5 billion to $3.5 billion and revive profit. In Pakistan, the London-based lender had 10 branches and gross assets of about $635 million as of June 30.
That’s more than the 57.2 billion rupees ($601 million) of assets at JS Bank at the end of March, according to data compiled by Bloomberg. The acquisition will make it the first Pakistani lender to purchase overseas banking assets since Faysal Bank Ltd. bought Royal Bank of Scotland Plc.’s local unit in October 2010 for 41 million euros ($53 million).
Earnings at JS Bank have improved even as power blackouts and declining exports strain the economy in Pakistan, which needs to repay billions of dollars to the International Monetary Fund. It posted net income of 360.6 million rupees in the year ended Dec. 31, rebounding from a loss of 407.5 million rupees a year earlier, data compiled by Bloomberg show.
JS Bank bought American Express Bank’s local assets in 2006 and began operations on Jan. 1, 2007.