The bank has a market share of 8 percent in terms of assets. It has 1,026 branches across the country and more than 4 million customers.

Pakistani stocks have fallen to their lowest level in almost 14 months on rumors involving political instability surrounding President Pervez Musharraf potential resignation. It also didn’t help that militant Islamists blew up the Danish embassy. Six Pakistani civilians were sacrificed to avenge the perceived blasphemy committed by Danish cartoonists two years ago.

The Karachi Stock Exchange’s 100-share index has dropped to lows not seen since early April, 2007, losing about 25 percent or nearly 3,000 points from a record high in April. The Pakistani rupee has lost more than 10% of its value during the last two weeks, while the Pakistani trade deficit has exceeded $10 billion, due to rising oil prices.

Bank stocks in particular have plummeted. Pakistan’s United Bank Ltd. has fallen more than 50% since mid-March, MCB Bank dropped almost by the same margin since February.

Which is surprising. MCB is Pakistan’s most profitable bank, with return on average equity of 38 percent and loan profitability of 8 percent. The bank has a market share of 8 percent in terms of assets. It has 1,026 branches across the country and more than 4 million customers.

In fact, MCB is so attractive that Malaysia’s biggest bank, Malayan Banking Bhd, agreed to pay over $920 million for a 20 percent stake, at an 11 percent premium to MCB’s May 2 closing price. Malayan is paying 5.1 times book value, twice the average 2.2 times book value for Pakistan banks.

Yes, MCB Bank was one of the stocks that did bounce back with the overall Karachi stock exchange.

We profitably applied a crisis investing strategy using Pakistani ADRs in the aftermath of the assassination of Benazir Bhutto. We think this is a good time to reprise it.

Buy MCB Bank (MCBBI) at current levels around $8, with an upside of 20% by September.

The ADR represents two original shares. The pricing typically moves with a 24-hour delay to the Karachi stock. For some reason, you cannot track the ADR on Google Finance… just the Pakistani stock. To track the ADR, refer to Bigcharts.om.

Source: Use MCB Bank ADRs to Leverage Political Crisis in Pakistan