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Maybank may raise stake in MCB in August

KUALA LUMPUR: Malaysia’s Maybank is set to buy another 5 percent of Pakistan’s MCB Bank as early as next month, in a deal estimated at $218 million, sources familiar with the matter said Thursday.

Malayan Banking Bhd, Malaysia’s leading lender, bought a 15 percent stake in MCB Bank, Pakistan’s top lender, for $680 million in May.

That deal included a clause whereby Maybank was obliged to buy up to another 5 percent of MCB Bank shares within one year of the first transaction.

The price for this stake was then agreed at Rs 490 per share, plus holding cost, with the total price not exceeding Rs 510 per share.

“The deal is very much on, the talks have started, and if all goes well, it should materialise sometime in August,” said a source close to the transaction.

A spokesman at Maybank declined comment. A spokesman at MCB Bank said any stake purchase by Maybank would be in line with the previous agreement, but he did not give a time frame for the new purchase.

Shares in MCB Bank were up 5 percent at Rs 256.3.

The latest transaction, if it materialises, is likely to raise many eyebrows as banking analysts had previously said Maybank had paid a high price in its haste to expand.

Maybank paid Rs 470 per MCB Bank share in May. At Rs 490 a share, another 5 percent stake would cost Rs 15.39 billion, or $218.4 million.

Long criticised for being too slow to expand overseas, Maybank suddenly sprang into action in March.

It bought 15 percent of Vietnam’s An Binh Bank for $135 million, then a week later paid $2.7 billion for a controlling stake in Bank Internasional Indonesia. Then it acquired the MCB Bank stake.

Maybank shares have fallen more than 20 percent this year, roughly in line with a drop in the broader market.

High Valuations: When Maybank bought into MCB Bank in May, paying 5.13 times MCB’s book value and an 11 percent premium to the stock’s last traded price, it voiced confidence in Pakistan’s political outlook after February elections returned the nation to civilian democratic rule for the first time in almost a decade.

Pakistan, a key US ally, also sits on the front line of conflict between Western forces and Islamist militants.

But markets have taken a beating since then.

Pakistan’s benchmark share index, KSE has lost about 20 percent so far this year due to growing concerns on the state of the country’s economy as well as politics.

MCB Bank shares have since fallen sharply as well, hitting an year-low of Rs 218 on Tuesday — less than half what they were when the initial deal was clinched in May. reuters

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