Commercial banks
operating in Pakistan are going through a transitory period.
Avoiding the transition is not possible. The factors responsible
for gradual but profound change are growing liquidity, declining
interest rates and shrinking spreads. In the past, the GoP was the
biggest borrower but after 9/11 not only the quantum of its
borrowing has reduced but the yield on government securities has
also came down drastically. Till couple of years back government
securities were the biggest source of earnings for most of the
commercial banks. In the absence of corresponding growth in
private sector demand for credit, banks have no option but to
explore new business potentials to resist decline in their
profitability.
The banking sector is
experiencing drastic changes forcing the players to redefine their
strategies. State Bank of Pakistan continues to update and amend
its regulations and instructions to enable the commercial banks to
improve their solvency and to enhance their capital strength and
competitive capabilities. The central bank has opened new business
opportunities by eliminating certain restrictions. Now banks are
allowed to implement their own credit policies. They enjoy more
freedom to tap many segments of the market, which were previously
unexplored.
The consumer banking
activities has enhanced as many players are coming up with branded
products. The competition in this area has intensified as larger
banks continue to play a significant role by improving the quality
of products and services they offer. New players have joined them
with innovative solutions and new services benchmarks. Competition
in this area is expected to get fiercer. The winners will be those
who could excel in customer services, improve quality of products
and continue innovations.
Local banks are posing a
bigger challenge to foreign banks. Larger banks, having the
advantage of greater reach, are threatening the existence of
smaller banks. Larger banks have adopted a more aggressive but
accommodating approach by focusing on client needs, improving
response time and increasing use of technology. Many banks have
started exploring rural areas with special focus on advances to
agriculture sector and related activities.
STATE OF
ECONOMY
Before looking into the
performance of commercial banks operating in Pakistan, it is
necessary to keep in mind the geopolitical conditions in the
region, the adverse impact of 9/11 and subsequent events to which
Pakistan could not remain immune. After the 9/11 the world plunged
into 'synchronized global recession' affecting even the most
developed economies. As against them Pakistan's economy was very
fragile and was suffering from a number of structural problems,
external debt crisis being the most contentious one. However, in
the post 9/11 era, the external debt issue has been resolved to a
large extent, easing the debt servicing pressure. Influx of fresh
aid and grants and reduced debt servicing requirements enabled the
country to accumulate foreign exchange reserves. On top of every
thing, exceptionally large inflow of remittances has been the
major reason. Pakistan succeeded in accumulating nearly US$ 10
billion by December end 2002. The SBP's buying of foreign exchange
from the kerb market, in an attempt to avoid massive appreciation
of rupee against dollar, also helped in building foreign exchange
reserves.
BANKING
SECTOR
Commercial banks
operating in the country can be divided into four distinct
categories, private banks, foreign banks, privatized banks and
nationalized commercial banks (NCBs). The number of private banks
has remained almost constant ever since they commenced operations
in early nineties, with the exception of Indus Bank that is under
liquidation. However, ownership of a number of private banks has
changed over the years. Lately, with the take over of Prudential
Bank and Platinum Bank by the new sponsors their names were
changed to Saudi Pak Commercial Bank and KASB Bank respectively.
Earlier, ownership of Union Bank and Schon Commercial Bank
changed. While the new sponsors of Union Bank preferred to
continue with the same name, the buyers of Schon Commercial Bank
changed its name to PICIC Commercial Bank.
Union Bank acquired the
operation of Emirates Bank International (EBI) in Pakistan. The
scheme of amalgamation was notified by the central bank on
September 03, 2002 and Union Bank settled the amalgamation price
of US$ 37 million on September 09, 2002. Union Bank had acquired
Pakistan operations of Bank of America in year 2000 and American
Express credit card business in Pakistan in year 2001.
In the NCBs category two
banks — Habib Bank and National Bank of Pakistan — have been left
after the privatization of United Bank. National Bank of Pakistan
has been listed at local stock exchanges and part of its shares
were off loaded. The GoP is actively pursuing the privatization of
Habib Bank, through sale of its 26% shares along with transfer of
management. The remaining shares of the GoP in Muslim Commercial
Bank and Bank Alfalah were also sold. The GoP sold majority shares
of Allied Bank of Pakistan in early nineties but has not been able
to off load its remaining shares in the bank.
United Bank's
privatization demands specific mention for two reasons, 1) it was
the largest transaction and 2) a large part of sale proceeds was
received in foreign exchange. The consortium comprising of Abu
Dhabi Group and Bestway Group has acquired 51% shares of the bank
along with management control. Since October 2002 the bank has
been working under the new sponsors.
Meezan Bank was created
as a result of merger of Al-Meezan Investment Bank and Societe
Generale. The first ever license to operate as a Scheduled Islamic
Commercial Bank was granted to Meezan Bank on January 31, 2002.
Pakistan operations of Societe Generale were amalgamated into
Meezan Bank on May 01, 2002. At the end of year 2002 it had six
branches, three in Karachi and one each in Islamabad, Lahore and
Faisalabad.
The number of foreign
banks operating in Pakistan has been declining constantly since
the GoP decided to freeze foreign currency accounts in May 1998.
The total number of foreign banks in the country has reduced to
half since the freezing of foreign currency accounts. The positive
point is that most of the foreign banks were able to sell their
Pakistan operations at attractive prices. Operations of ANZ
Grindlays Bank have been fully amalgamated into Standard Chartered
Bank as a result of global merger.
KEY
PLAYERS
ASKARI COMMERCIAL BANK has posted Rs 687 million profit after tax for the year
2002 as compared to a profit of Rs 551 million for the previous
year. The Board of Directors also announced 20% dividend and issue
of 5% Bonus Shares subject to the approval of issue of Bonus
Shares by the SECP. The bank had distributed 20% dividend among
its shareholders for the year 2002 and also issued 5% Bonus
Shares. The Bank transferred Rs 137 million to statutory reserve
and Rs 284 million to revenue reserve. EPS improved from Rs 5.06
for the year 2001 to Rs 6.32 for the year 2002.
BANK AL
HABIB has posted Rs 290 million
profit after tax for the year 2002 as compared to a profit of Rs
246 million for the previous year but bid not announce any
dividend. The Board of Directors has approved issue of 20% Bonus
Shares. The bank had paid 5% dividend and also issued Bonus Shares
at the end of year 2001. Though there was increase in total
income, total expenditure also went up. Total income grew from Rs
1,090 million to Rs 1,383 million. Non-mark-up/interest expenses
went up from Rs 539 million to Rs 763 million. EPS improved from
Rs 2.84 for the year 2001 to Rs 3.35 for the year
2002.
BANK OF
PUNJAB has posted Rs 284
million profit after tax for the year 2002 as compared to a profit
of Rs 236 million for the previous year. The Board of Directors
approved distribution of 17.5% dividend among the shareholders for
the year 2002. The bank had distributed 15% dividend to its
shareholders for the year 2001 and also issued Bonus Shares
amounting to over Rs 24 million last year. The Bank transferred Rs
56.8 million to statutory reserve and Rs 50 million to general
reserve. EPS improved from Rs 2.35 for the previous year to Rs
2.83 for the year 2002.
BOLAN
BANK has posted Rs 3.7
million profit after tax for the year 2002 as compared to a profit
of Rs 8.7 million for the previous year. EPS declined from Rs 0.17
for the year 2001 to Rs 0.07 for the year 2002. It is worth noting
that profit before tax improved from Rs 10 million for year 2001
to Rs 24.7 for the year 2002. However, due to higher appropriation
for tax for the year 2002, profit after tax declined
substantially. Tax appropriation went up from Rs 1.3 million to
slightly more than Rs 21 million.
FAYSAL BANK has
posted Rs 656 million profit after tax for the year 2002 as
compared to a profit of Rs 410 million for the previous year and
also announced 17.5% dividend. It had distributed 10% dividend to
its shareholders for the year 2001. The improvement in profit was
driven by higher income, going up from Rs 1,489 million to Rs
1,877 million. There was decrease in fee-based income but increase
in dividend income. Fee, commission and brokerage income went down
from Rs 242 million to Rs 205 million. Dividend income grew from
Rs 208 million to Rs 391 million. However, there was increase in
non-mark up expenses, going up from Rs 534 million to Rs 622
million, mainly due to rise in administrative expenses. EPS
improved from Rs 1.55 for the year 2001 to Rs 2.48 for the year
2002.
KASB BANK (formally Platinum Commercial Bank) has posted Rs 114
million loss after tax for the year ending December 31, 2002 as
against a loss of Rs 67.5 million for the previous year. The
results pertain to the operations under the previous management as
the new sponsors took over the management in October 2002. The
change in name was brought subsequent to the notification of the
central bank dated February 21, 2002. It is expected that the
combination of services which the bank will have access to will be
unique. Once corporate reorganization is complete, the bank will
have a majority stake in KASB Leasing and a 100% stake in Khadim
Ali Shah Bukhari & Company (KASB). Hence, the client base at
large will not only have access to commercial and consumer banking
services, but to lease financing, equity and debt securities
broking, investment banking and investment advice.
MEEZAN BANK has
posted Rs 223 million profit after tax for the year 2002 as
against a loss of about Rs 54 million for the previous year.
However, it must be kept in mind that 2002 was the first year of
operations as a full-fledged scheduled commercial bank. The total
financing portfolio of the bank as on December 31, 2002 amounted
to Rs 3.53 billion. As of the balance sheet date the bank did not
have any overdue or defaulting accounts. The bank has introduced
Islamic Export Refinance Scheme. This has, for the first time in
Pakistan, enabled exporters to avail financing at concessional
rates under a Shariah compliant scheme,
METROPOLITAN BANK has
posted Rs 430 million profit after tax for the year 2002 as
compared to a profit of Rs 335 million for the previous year and
also announced 20% dividend. It did not distribute any dividend to
its shareholders for the year 2001 but issued 25% Bonus Shares.
The improvement in profit was driven mainly by higher income,
going up from Rs 1,112 million to Rs 1,362 million. There was
increase in fee-based income and dividend income. Fee, commission
and brokerage income went up from Rs 168 million to Rs 235
million. Dividend income grew from Rs 1.7 million to Rs 11.4
million. However, there was increase in non-mark up expenses,
going up from Rs 369 million to Rs 486 million, mainly due to rise
in administrative expenses. EPS improved from Rs 3.35 for the year
2001 to Rs 4.30 for the year 2002.
MUSLIM
COMMERCIAL BANK has posted Rs
1,739 million profit after tax for the year 2002 as compared to a
profit of Rs 1,108 million for the previous year. This is the
first year in the history of MCB and in the banking sector that
two interim announcements were made, 10% Bonus Shares and 25%
dividend besides 15% final Bonus Shares. Another achievement was
that the bank did not make provision for diminution in the value
of investment and also against non-performing loans and advances.
However bed debts worth Rs 721 million were written off directly.
Deposits went up from Rs 154.5 billion to Rs 182.7 billion.
Advances grew from Rs 76.6 billion to Rs 78.9 billion. Value of
investments went up from 55.4 billion to Rs 89.6
billion.
NATIONAL
BANK OF PAKISTAN has posted Rs
6 billion profit before tax for the year 2002, a record profit in
the history of banking sector in Pakistan. Profit after tax came
to Rs 2.253 billion as against a profit of Rs 1.148 billion for
the year 2001. The key factor behind this increase was no more
amortization of deferred cost. The bank has made the final
provision of Rs 2.7 billion against this head in year 2001. The
Board of Directors approved payout of 12.5% dividend and issue of
10% Bonus Shares. The bank had also distributed 12.5% dividend for
the year 2001.
PICIC
COMMERCIAL BANK has
posted Rs 319 million profit after tax for the year 2002 as
compared to a profit of Rs 112 million for the previous year. The
Board of Directors approved issue of 30% Bonus. The bank had not
distributed any dividend to its shareholders but issued Bonus
Shares amounting to Rs 125 million for the year 2001. The Bank
transferred Rs 63.85 million to statutory reserve. EPS improved
from Rs 1.78 for the year 2001 to Rs 4.30 for the year 2002. The
bank opened 22 new branches during the year 2002 and has received
permission to open another 22 branches during the year
2003.
PRIME
COMMERCIAL BANK has posted Rs
176 million profit after tax for the year 2002 as compared to a
profit of Rs 153 million for the previous year and also announced
10% dividend. The bank did not distribute any dividend to its
shareholders for the year 2001. Total income went up from 603
million to Rs 822 million. However, there was increase in non-mark
up expenses, going up from Rs 362 million to Rs 516 million,
mainly due to the rise in administrative expenses. The factors
contributing to higher profit were decline in provision against
non-performing loans and advances, and increase in income/gains
from trading in government securities. EPS improved from Rs 1.51
for the year 2001 to Rs 1.74 for the year 2002.
SAUDI PAK
COMMERCIAL BANK achieved
substantial growth during the year ending December 31, 2002. This
remarkable performance was due to the enormous improvement in its
corporate image. The bank posted Rs 202 million profit after tax
for the year 2002 as against a loss of Rs 182 million for the
previous year. Deposits increased by 156% to Rs 12,340 million and
advances by 95% to Rs 9,753 million. The credit deposit ratio
improved from 104% to 79%. Investments including lending to
financial institutions also grew by 166% to Rs 7,410 million. The
total asset base doubled, from Rs 9,513 million to Rs 19,617
million. Non-performing advances of Rs 640 million were
regularized during the year. The ratio of performing advances to
total advances improved markedly from 29% in year 2001 to 69% for
the year 2002. However, a real concern for the investors is that
the bank still carries accumulated losses of over Rs 811
million.
Soneri Bank has posted Rs
350 million profit after tax for the year 2002 as compared to a
profit of Rs 270 million for the previous year and also announced
10% dividend. It did not distribute any dividend to its
shareholders for the year 2001 but issued 30% Bonus Shares. The
improvement in profit was driven by higher income, going up from
Rs 915 million to Rs 1,073 million. There was increase in
fee-based income but income from dealing in foreign currencies
decreased. Fee, commission and brokerage income went up from Rs
111 million to Rs 133 million. Income from dealing in foreign
currencies came down from Rs 348 million to Rs 184 million. Other
income grew from Rs 77 million to Rs 175 million. However, there
was increase in non-mark up expenses, going up from Rs 364 million
to Rs 452 million, mainly due to rise in administrative expenses.
EPS went up from Rs 2.66 for the year 2001 to Rs 3.44 for the year
2002.
UNION
BANK has posted Rs 286
million profit before tax for the year 2002 as compared to a
profit of Rs 9 million for the previous year. The bank posted Rs
286 million profit before tax for the year 2002 but an
appropriation of Rs 122.5 million reduced profit after tax to Rs
163 million. The Board of Directors did not approve distribution
of dividend. EPS improved from Rs 0.43 for the year 2001 to Rs
1.34 for the year 2002. The bank is following an aggressive
marketing strategy well supported by investment in technology.
This has resulted in heavy administrative expenses, going up from
Rs 1,056 million to Rs 1,591 million.
UNITED
BANK has posted Rs 1,414
million profit after tax for the year 2002 as compared to a loss
of Rs 7,478 million for the previous year. The loss for year 2001
was mainly due to an extraordinary item amounting to Rs 7,200
million. The increase in profit of the bank can be attributed to
higher income, lower provision against non-performing loans and
lower appropriation for tax. Total income went up from Rs 6,643
million to Rs 8,173 million. Provision against non-performing
advances came down from Rs 1,488 million to Rs 852
million.
BANK
ALFALAH has posted Rs 445.7
million profit after tax for the year 2002 as compared to a profit
of Rs 310.6 million for the previous year. EPS improved from Rs
3.65 for year 2001 to Rs 4.46 for the year 2002. The Board of
Directors approved distribution of 20% dividend to the
shareholders and issue of 33.33% Bonus shares. Net
mark-up/interest income grew from Rs 891 million to Rs 1,463
million. Non mark-up income went up from Rs 377.9 million to Rs
615.4 million. However, non mark-up/interest expenses also hiked
from Rs 744 million to Rs 1,184 million. Investments went up from
Rs 11,396.6 million to Rs 24,694.4 million. Advance went up from
Rs 19,131.5 million to Rs 28,319.4 million. Deposits went up from
Rs 30,207 million to Rs 51,685 million.
STANDARD
CHARTERED BANK has released the
financial accounts for the year 2002 after amalgamation of ANZ
Grindlays Bank into it. The bank has posted Rs 1,408 million
profit after tax for the year 2002 as compared to the combined
profit of Rs 396 million for both the banks for the year 2001.
Customer deposits grew from Rs 51,643 million to Rs 55,525
million. Customer advances went up from Rs 38,096 million to Rs
17,653 million. The most remarkable feature was nearly three-fold
increase in investment, going up from Rs 5,817 million to Rs
17,653 million. As the bank continued to add new products and
further improve the level of customer support, there was increase
in administrative expenses also, going up from Rs 598 million to
Rs 1,195 million.
CITIBANK has posted Rs
1,064 million profit for the year 2002 as compared to a profit of
Rs 847 million for the previous year. Among the foreign banks,
Citibank has recorded the highest capital gains on investments,
going up from a meagre of Rs 30 million to Rs 364 million. While
the bank experienced decline in deposits and advances, there was
substantial increase in investments. Deposits came down from Rs
41,506 million to Rs 40,838 million. Advances declined from Rs
27,119 million to Rs 25,657 million. Investments went up from Rs
6,799 million to Rs 11,280 million.
ABN
AMRO BANK has improved
its profit after tax from Rs 732.5 million for the year 2001 to Rs
1,025.5 million for the year 2001. The investment by the bank in
technology and introduction of new value-added products and
services has started yielding results. There was marginal increase
in deposits, going up from Rs 34,192 million to Rs 34,696 million.
Advances grew from Rs 23,861 million to Rs 25,141 million.
Investments came down from 9,317 million to Rs 8,935
million.
DEUTSCHE
BANK has posted a meagre profit
of Rs 119 million for the year 2002. However, it should be looked
as an achievement because the bank had posted heavy loss for the
year 2001. The declining trend was witnessed in deposits, advances
and investments. Deposits came down from Rs 3,994 million to Rs
2,701 million. Advances declined from 3,169 million to Rs 2,293
million. Investments plunged from Rs 571 million to Rs 304
million.
OUTLOOK
After the good
performance in 2002, the operating environment for banking sector
in 2003 poses great challenges particularly in the environment of
declining interest rates and shrinking spreads. Banks are forced
to take new initiative to combat fierce competition and eroding
profits margins. Though the economy is set to grow, the growth of
banking sector will largely depend on the growth of private sector
credit demand.
One of the key success
factors for a commercial bank in future will be its ability to
reach out to its clients through multiple delivery channels,
ranging from a traditional brick and mortar branch network to a
state-of-the-art customer contact centres, comprehensive ATM
network and Internet-based banking facilities.
Banks are expected to
redefine their marketing strategy. Most of them will focus more
intently on retail banking products such as personal loans, small
business finance, mortgages and investment products, The advent
into the retail banking will only be hampered by scarcity of
skilled human resource with exposure in handling consumer
products, especially assets. The consumers will be reached through
technology dependent channels of distribution such as ATMS, Debit
and Credit cards.
|
Table-1
LISTED COMMERCIAL
BANKS |
|
Askari Commercial
Bank |
:ACB |
|
Bank AL
Habib |
:BAH |
|
Bank of
Punjab |
:PoB |
|
Bolan
Bank |
:BB |
|
Faysal
Bank |
:FB |
|
KASB
Bank |
:KB |
|
Meezan
Bank |
:MB |
|
Metropolitan
Bank |
:Metro |
|
Muslim Commercial
Bank |
:MCB |
|
National Bank of
Pakistan |
:NBP |
|
PICIC Commercial
Bank |
:PCB |
|
Prime
Bank |
:PB |
|
Saudi Pak
Bank |
:SPB |
|
Soneri
Bank |
:SB |
|
Union
Bank |
:UB |
|
Table-2
SHAREHOLDERS EQUITY AS ON
31/12/2002 |
| |
(Rs in
million) |
| |
Paid-up capital |
Reserves |
Accumulated Profit |
Total
Equity |
|
ACB |
1,087 |
1,939 |
0 |
3,026 |
|
BAH |
866 |
940 |
16 |
1,822 |
|
PoB |
1,004 |
1,358 |
1 |
2,363 |
|
BB |
1,016 |
84 |
12 |
1,112 |
|
FB |
2,648 |
1,447 |
25 |
4,120 |
|
KB |
616 |
146 |
-169 |
593 |
|
MB |
1,001 |
475 |
0 |
1,476 |
|
Metro |
1,000 |
1,063 |
11 |
2,074 |
|
MCB |
2,665 |
3,027 |
622 |
6,314 |
|
NBP |
3,730 |
7,144 |
3,405 |
14,279 |
|
PCB |
825 |
489 |
9 |
1,323 |
|
PB |
1,008 |
372 |
0 |
1,380 |
|
SPB |
1,500 |
114 |
-811 |
803 |
|
SB |
1,018 |
768 |
6 |
1,792 |
|
UB |
1,626 |
375 |
242 |
2,243 |
|
Table-3
PROFIT BEFORE TAX FOR
2002 |
| |
(Rs
in million) |
|
ACB |
1,244 |
|
BAH |
620 |
|
PoB |
432 |
|
BB |
25 |
|
FB |
1,255 |
|
KB |
-102 |
|
MB |
271 |
|
Metro |
876 |
|
MCB |
3,101 |
|
NBP |
6,045 |
|
PCB |
509 |
|
PB |
306 |
|
SPB |
293 |
|
SB |
621 |
|
UB |
286 |
|
Table-4
ASSETS AS ON
31/12/2002 |
| |
(Rs.
in million) |
| |
Gross |
Net |
|
ACB |
70,313 |
4,173 |
|
BAH |
49,437 |
2,592 |
|
PoB |
29.533 |
3,313 |
|
BB |
10.595 |
1,119 |
|
FB |
36,671 |
5,264 |
|
KB |
4,037 |
752 |
|
MB |
6,971 |
1,586 |
|
Metro |
41,381 |
3,106 |
|
MCB |
235,139 |
11,699 |
|
NBP |
432,802 |
23,936 |
|
PCB |
27,982 |
2,302 |
|
PB |
21,637 |
1,581 |
|
SPB |
19,617 |
1,005 |
|
SB |
27,998 |
2,293 |
|
UB |
55,849 |
2,736 |
|
Table-5
DEPOSITS AS ON
31/12/2002 |
| |
(Rs
in million) |
|
ACB |
51,732 |
|
BAH |
34,240 |
|
PoB |
23,767 |
|
BB |
7,761 |
|
FB |
24,554 |
|
KB |
2,640 |
|
MB |
5,079 |
|
Metro |
28,515 |
|
MCB |
182,706 |
|
NBP |
362,866 |
|
PCB |
21,155 |
|
PB |
14,640 |
|
SPB |
12,341 |
|
SB |
20,545 |
|
UB |
37,760 |
|
Table-6
ADVANCES AS ON
31/12/2002 |
| |
(Rs.
in million) |
|
ACB |
30,035 |
|
BAH |
23,775 |
|
PoB |
6,621 |
|
BB |
3,298 |
|
FB |
21,935 |
|
KB |
490 |
|
MB |
3,532 |
|
Metro |
19,444 |
|
MCB |
78,924 |
|
NBP |
140,547 |
|
PCB |
10,876 |
|
PB |
9,016 |
|
SPB |
8,522 |
|
SB |
11,378 |
|
UB |
28,890 |
|
Table-7
INVESTMENTS AS ON
31/12/2002 |
| |
(Rs.
in million) |
|
ACB |
26,759 |
|
BAH |
18,831 |
|
PoB |
8.295 |
|
BB |
1,328 |
|
FB |
6,842 |
|
KB |
2,118 |
|
MB |
856 |
|
Metro |
15,013 |
|
MCB |
89,610 |
|
NBP |
143,525 |
|
PCB |
10,306 |
|
PB |
7,534 |
|
SPB |
6,365 |
|
SB |
9,844 |
|
UB |
11,822 |
|
Table-8
ADMINISTRATIVE EXPENSES FOR
2002 |
| |
(Rs.
In million) |
|
ACB |
1,090 |
|
BAH |
760 |
|
PoB |
901 |
|
BB |
380 |
|
FB |
619 |
|
KB |
204 |
|
MB |
195 |
|
Metro |
485 |
|
MCB |
8,077 |
|
NBP |
9,138 |
|
PCB |
326 |
|
PB |
512 |
|
SPB |
262 |
|
SB |
440 |
|
UB |
1,563 |