KARACHI - An aggressive bidding competition is expected to be seen during the bidding for acquisition of Royal Bank of Scotland, Pakistan, sources told The Nation. They said that the Habib Bank Limited, MCB Bank and Jahangir Siddiqui Company are the leading financial institutions in Pakistan and they would compete in the bidding to acquire stake of RBS Pakistan. It must be recalled here that Habib Bank Limited (HBL), MCB bank and Jahangir Siddiqui Company Ltd (JSCL) sent separate notices to the KSE on Monday, showing their interest in acquiring Royal Bank of Scotlands (RBS) Pakistan operations. The financial institutions have sought approval from the State Bank (SBP) to commence due diligence of the RBS. A financial advisor (either a person or a financial entity) would soon be appointed who will finally decide the pricing formula after thoroughly evaluating the loss/profit, asset and liabilities and deposits position of the interested investors upon which it will likely to be agreed. During the proposed period of due diligence, the interested banks are allowed to go for auditing of the balance sheets of the bank/institution that is put on sale. According to banking sources, so far, interested investors have not assigned their financial advisors. Farhan Rizvi, a research analyst at a reputed brokerage house, said Pakistan has witnessed a number of banking sector acquisitions over the last few years when government speeded up its privatisation program to divest holdings in public sector commercial banks. Moreover, the economic boom during (FY03-08) also saw a number of private sector acquisitions including Union Bank, Prime Bank, PICIC & MCB bank etc. These transactions were carried out at an average premium of 4.5 times over book value while banks then traded at an average Price to Book Value of 2.2x. However, given the current economic downturn (listed banks profits down 21% in 2008) it is believed that such premiums over book value may not materialize in case of RBS. The listed banking sector currently trades at PBV of 1.2x (45% discount to last 4 years average of 2.2x), hence if same discount to previous deals is applied, the transaction price arrives at Rs14.5/share. However, it is difficult to estimate the actual price, he said. With both HBL and MCB bank already strong and well established local market players, the question beckons what would RBS with relatively limited operations of 79 branches and assets of Rs108bn offer to these giant players. I think few areas where RBS could provide value addition include its well established consumer banking business, its valued multinational client base and quality human resource, he added. MCB and HBL had been late entrants in the consumer banking business and even though consumer business is likely to remain under pressure in the short term its does offer long term opportunity once economy starts picking up again. Moreover, despite a quality corporate loan book both MCB and HBL would gain access to top quality multinational clients of RBS. Further RBS possess a well trained and quality human resource which could provide value to MCB and HBL, analyst explained.