Final PR
The Pakistan Credit Rating Agency Limited

Saira Rizwan

Rida Zahoor

Applicable Criteria

  • Rating Modifiers | Outlook and Rating Watch (Jun 16) [View]

Related Research

  • Sector Study | Commercial Bank (Jun 16) [View]
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 Rating Type Entity Debt Instrument
 Action Maintain 
 Long Term AA- 
 Short Term A1+
 Outlook Stable 
 Rating Watch RatingWatch - ✔

In a recent development, the boards of Directors of NIB Bank Limited (NIB) and MCB Bank Limited (MCB) have decided in favour of a merger of NIB with and into MCB. The merger would be under share swap arrangement. Shareholders of NIB will be issued MCB’s shares according to a swap ratio of 1:140.043. The transaction will complete once the requisite regulatory approvals are obtained. Herein, approval from the State Bank of Pakistan (SBP) is critical. The merger should bode well for different stakeholders of NIB – particularly for depositors and borrowers.

Considering these developments, PACRA is placing the ratings of NIB on Rating Watch. Entity ratings of NIB would be withdrawn if the merger is finalized and NIB would seize to exist as an entity. While, TFC rating will be reviewed in line with profile of MCB.
About the Entity
About NIB:
NIB is a small sized bank, holding ~1% share in the total banking customer deposits as at end-Sep16. It operates a network of 171 branches. The Bank, incorporated in 2003 after a series of mergers, is currently majority (88%) owned by Temasek Holdings through its subsidiaries. In case of successful amalgamation, Temasek would have ~5.5 ownership in MCB.

About MCB:
MCB is the fourth largest bank in terms of its share in total banking deposits of the country (~7.1% at end-Sep16). The bank is operating with 1,213 branches. MCB is majority owned by Nishat group (~42%), a prominent business conglomerate, having diversified interests in textile, cement, power, financial services, and insurance sectors. Malayan Banking Berhad (Maybank) of Malaysia, has 20% stake in MCB since May08. A set of prominent domestic industrial groups also own a sizeable stake in the bank.

About the Instrument
NIB has in issue an unsecured, subordinated TFC of PKR 4,198mln. The instrument, issued in Jun14, has a tenor of eight years. The issuer has call option on TFCs, in part of full, after Jun16.
The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.