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Banking Review 2013
Banking Review 2013
Banking Review 2013
Review2013
Monday, March 10, 2014 | www.brecorder.com/br2013
Contents
BANKING REVIEW 2013 | March 10, 2014
BR
RESEARCH
THE TEAM
Sohaib Jamali
Editor Research
Zuhair Lalani
Abbasi
Zuhair
Abbasi
Rabia
Research
Senior
Analyst
Research
AnalystAnalyst
Sijal FawadHaider
Hammad
Research
AnalystAnalyst
Senior
Research
Sidra Farrukh
Research Analyst
Javeria Ansar
Research Analyst
Sobia Muhammad
Saleem
Research Analyst
Adil Mansoor
Research Analyst
Rabia Lalani
BANKING:
AN UNCONVENTIONAL VIEW
Syed Bakhtiyar Kazmi
PAGE 17
Naseem Waheed
Research Analyst
BANKING AT A GLANCE
PAGE 20
Murtaza Khaliq
Creative Head
Editors note
Banking blues
Ali Khizar
Rs2.3
trillion
Rs476
billion
Rs2.77
trillion
as of June 2008
as of January 2014
Atif Bajwa
30%
25%
20%
15%
10%
5%
Jan -07
Jul -07
Jan -08
Jul -08
Jan -09
Jul -09
Jan -10
Jul -10
Jan -11
Jul -11
Jan -12
Jul -12
Jan -13
Jul -13
Lending rate
Deposit rate
%
16
14
12
10
8
6
4
2
Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10
Dec-11
Dec-12 Dec-13
Deposit-to-GDP ratio
India
Bangladesh
Pakistan
%
70
60
50
40
30
20
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
President and
Chief Executive Officer,
Summit Bank
Husain Lawai is a seasoned banker who has worked both in Pakistan and the Middle East.
Currently, he is serving as the President and the CEO of Summit Bank. In this interview with
BR Research, Lawai talks about the banks plans to raise capital to meet its capital adequacy
requirements as well as its plans of conversion to Islamic bank.
Below is the edited transcript.
Interview by
Ali Khizar and Sobia Saleem
HabibMetro eyes
growth in trade finance
Sirajuddin Aziz
By December 2014 we
can expect HabibMetros
ADR to mark at
55-58 percent
Interview by
Ali Khizar & Sobia Saleem
Stance
M.P
T.P
25-Feb-13
Habib Bank Limited
National Bank of Pakistan
MCB Bank Limited
United Bank Limited
Bank Alfalah
Allied Bank Limited
Bank AlHabib
Meezan Bank Limited
BankIslami Pakistan
Askari Bank
Market weight
Market weight
Under weight
Market weight
Over weight
Market weight
Over weight
Over weight
Over weight
Market weight
158.69
57.35
266.77
133.51
27.98
88.79
39.51
37.48
8.96
13.37
147.92
54.24
249.63
137.40
29.01
90.61
46.07
44.00
13.00
14.00
P/E
P/BV
Dividend Yield
2012*
2013*
2014
2012*
2013*
2014
2012*
2013*
2014
6.29
5.28
8.65
4.86
4.71
6.03
5.50
6.97
11.97
9.36
7.94
9.42
11.62
7.05
5.95
5.24
6.39
8.40
26.09
N/A
8.24
7.67
11.21
8.16
6.72
7.84
6.56
7.35
6.35
16.92
1.11
0.56
1.61
1.02
0.71
1.28
1.25
1.48
0.88
0.60
1.22
0.69
2.36
1.37
0.84
1.28
1.31
1.80
0.66
1.30
1.35
0.78
2.32
1.58
1.08
1.40
1.41
1.77
0.77
1.09
6.6%
14.4%
7.4%
11.8%
13.7%
8.6%
10.1%
5.5%
0.0%
0.0%
6.4%
8.5%
5.6%
9.0%
9.6%
7.1%
9.2%
4.6%
0.0%
0.0%
5.9%
10.3%
5.8%
7.3%
8.6%
7.0%
8.5%
5.3%
0.0%
0.0%
Highlighting Traits
Improvement in CASA and NIMs
Signicant reduction in CASA and focus on islamic banking
Attractive NIMs and strong recoveries
Improvement in asset quality and attractive NIMs
Deposit growth due to branch addtions and improvement in CASA mix
Strong non-interest income and strong equity portfolio
Improved asset quality, fast NIM growth and attractive coverage ratio
Pioneer of Islamic banking, strong brand equity
Tremendous deposit growth and lower cost of funds
Declining NIMs, with huge NPLs
Weaknesses:
Lack of innovative lending products
High dependence on spreads
Increased investment in government securities resulting in depressed private sector credit off-take
High percentage of savings deposits as a percentage of total deposits
Opportunities:
Fresh private sector credit off-take
Increase in market share through internet and mobile banking,
which can reduce operational costs over time
Introduction of new products, such as branchless banking
Threats:
Continued monetary tightening, which may hamper the growth in credit off-take
Listing of government securities and corporate Sukuks
Attractive rates on national savings schemes
Banking:
An unconventional view
Syed Bakhtiyar Kazmi
Banks are the overseers of a nations premier
asset, its savings deposits; unless of course
that nation is blessed with surplus oil reserves
in which case the government could care less
about monetary shenanigans.
Frankly, oil rich autocracies, which are the
rule by the way, need neither indulge in
brilliance of conception nor excellence of
execution, petrodollars buy everything.
Economists, the forbearers of doom, have
even managed to showcase oil wealth as a
disease and coined a phrase for it. Still, all
nations dream of being compared with the
Dutch, and for good reason too. Empirical
evidence clearly establishes that booms are
sweeter for oil rich nations and recessions
avoid them like the plague!
Pakistans dreams for oil elephants are far
from fruition; accordingly the nation, by
default, has to ensure efcient utilization of all
other resources, if it ever expects to be
elevated to the ranks of developed nations.
The standard formula for development of an
agricultural economy is through an industrial
revolution, which requires investment of its
savings in projects that create employment
and increase productivity. Banks can play a
pivotal role in channelling precious resources
either towards self sustainability or funding
wasteful consumer choices leading to abject
dependence; or worse.
The evolution of banking remains dependent
on the mischief of money and ever since the
invention of at money, the business of
banking is potentially riskier than an invasion
force armed to the teeth with WMD; sub-prime
and euro debt crises are proof of the carnage
and chaos banks are capable off.
For a long time preceding the crises, it was
actually believed that money and its ilk had
actually moderated, or was it tamed, the
business cycle; a clever idea down the drain.
Business cycles rule supreme, unchallenged;
what fools these mortals be!
Governments were always cognizant of
these associated hazards, if not their ferocity,
and have endeavoured to establish a foolproof
regulatory regime for banking; unfortunately
never succeeding. The events of 2008 have
effectively exposed the inability of the latest
banking standards established under the Basel
Accord to identify a storm, let alone prevent it.
If Basel-II had been remotely effective, the
Challenges
One could easily overestimate the maturity of
mortgage lending in the country after going
through the strategic goals for house nance
by the Infrastructure and Housing Finance
Department of SBP. The reality is still far behind
from whats on paper. Of the major challenges
that shroud the domestic mortgage based
nancing, experts speak of the lack of a
regulatory framework, absence of secondary
mortgage market and long-term xed interest
rates as the prime ones.
Also, the reluctance in mortgage lending by
the banking sector is due to poor tenancy,
possession and foreclosure laws and weak
enforcement. This can indeed be seen from the
declining trend in real estate exposure by the
Rs(bn)
4,000
7%
3,500
6%
3,000
5%
2,500
4%
2,000
3%
1,500
1,000
2%
500
1%
Jun
06
Feb
07
Oct
07
Jun
08
Feb
09
Oct
09
Jun
09
Feb
11
Oct
11
Jun
12
Feb
13
Oct
13
1%
Indonesia
2%
Bangladesh
3%
India
China
Thailand
Korea
Malaysia
Singapore
Hong Kong
USA
UK
7%
12%
17%
26%
29%
32%
41%
80%
86%
IDR
Improving CASA
ADR
Deposits (RHS)
80%
Rs(bn)
10,000
70%
70%
9,000
65%
60%
8,000
50%
7,000
40%
6,000
30%
5,000
20%
CY08
CY09
CY10
CY11
CY12
4,000
Sep-13
CASA
Rs(bn)
6,900
5,700
4,500
60%
3,300
55%
2,100
50%
CY08
CY09
CY10
CY11
CY12
Corporate sector
Consumer finance
0%
15%
30%
0.25%
SME
Commodity finance
45%
60%
75%
900
Jun-13
27%
90%
105%
Top 5 banks
Deposit mix
Current accounts
Saving deposits
Fixed deposits
Call deposits
Other deposit accounts
6-10 banks
11-20 banks
30%
1%
21-28 banks
Foreign Banks
41%
Specialized Banks
Current accounts
Infection ratio
50%
Fixed deposits
40%
SME
Rs(bn)
0
1,000
30%
20%
Agriculture
Consumer finanace
10%
0%
Corporate
500
1000
1500
Advances Rs(bn)
2000
2500
3000
Top-10 sectors (in terms of lending) & their infection ratio (Sep-13)
50%
Electronic
Infection ratio
40%
30%
20%
10%
Textile
Cement
Transportation
Chemicals
Financial
Individuals
Agriculture
Sugar
0%
0
100
Energy
200
300
400
Advances Rs(bn)
500
600
700
800
Saving deposits
Call deposits
2,000
3,000
4,000
5,000
6,000
7,000
8,000
CY08
CY09
CY10
CY11
CY12
Jun-13
Rs('000)
210
(mn)
40
190
35
170
30
150
25
130
20
CY08
CY09
CY10
CY11
CY12
Jun-13
Foreign constituents
Others
Breakup of
industry
deposits by
depositor
type
(June-13)
Government
Non-financial PSEs
Advances (R.H.S)
NBFCs
Rs(bn)
4,000
19%
Personal
3,800
17%
Prviate sector enterprises
3,600
15%
13%
3,400
11%
3,200
9%
NPLs
CY08
CY09
550
450
350
250
150
CY09
CY10
CY11
CY12
Sep-13
%
35
30
25
20
15
10
5
0
10%
950
9%
800
8%
650
7%
500
6%
350
5%
200
CY08
CY09
CY10
CY11
CY12
Sep-13
Category-wise ROE
65
55
CY08
CY09
CY12
Sep-13
45
CY08
CY09
CY10
CY11
CY12
Salam
Financing
mix of
Islamic
banking
industry
22%
Murabaha
18%
14%
10%
Diminishing
Musharaka
6%
Musharaka
4%
Ijarah
2%
Mudaraba
CY11
CY12 Sep-13
Foreign banks
%
2.0
12
Rs(mn)
700
1150
1.5
1000
1.0
6
3
0
CY08
CY09
CY10
CY11
CY12
Sep-13
600
850
0.5
700
0.0
550
CY08
(0.5)
Sep-13
Others
15
(6)
CY11
18
(3)
CY10
Category-wise ROA
Foreign banks
3,000
75
1100
Sep-13
85
Istisna
Rs(bn)
CY12
95
CY11
Rs(bn)
650
CY10
Loan Coverage
CY08
Infection ratio
CY09
CY10
CY11
CY12
Sep-13
400
500
400
CY08
CY09
CY10
CY11
CY12
Sep-13
300
90%
80%
85%
70%
80%
75%
60%
70%
50%
65%
40%
60%
MCB
HBL
BAFL
BAHL
NIB
AKBL
Silk Bank
Faysal Bank
Samba
NBP
Top 5 Banks in terms of CEO remuneration (Data based on annual reports -2012)
130%
100%
55%
85%
50%
70%
45%
55%
40%
160%
140%
120%
100%
35%
40%
Samba
MCB
MEBL
BAHL
SCB
JS
60%
115%
MCB
UBL
MEBL
HBL
80%
NBP
ABL
BAHL
MEBL
Industry average of
listed commercial banks
(As of Sep-13)
50%
45%
40%
35%
30%
25%
20%
15%
KASB
BOP
NIB
Summit
Askari
BIPL
MEBL
BAFL
ABL
BAHL
ADR
52%
IDR
51%
Infection ratio
16%
Coverage ratio
79%
CASA
59%
Spread ratio
38%
15%
34%
SAMBA
Irfan Siddiqui is the founding President & CEO of Meezan Bank Ltd. He initiated the formation of Al-Meezan Investment Bank in 1997, which was converted into a full-fledged scheduled Islamic commercial bank in May 2002. This was the first ever license to be given for
Islamic commercial banking in Pakistan. Meezan Bank is now the largest Islamic commercial
bank in Pakistan with 351 branches spread across 103 cities.
Siddiqui is a Chartered Accountant from England & Wales and has extensive financial sector
experience with Abu Dhabi Investment Authority, Abu Dhabi Investment Company, Kuwait
Investment Authority and Pakistan Kuwait Investment Company.
Interview by
Zuhair Abbasi and Sobia Saleem
Before joining Burj Bank as its President and CEO, Ahmed Khizer Khan worked as Chief
Operating Officer of ICD (Islamic Corporation for Development of the Private Sector),
Jeddah. ICD is one of the two main sponsors of Burj Bank and is a group company of Islamic
Development Bank (IDB), Jeddah.
Prior to joining ICD, Khizer was the Chief Executive of Barclays Global Retail and Commercial Banking, the UAE from 2006 to 2010. He was associated with Citigroup from 1997 to
2006 in various senior level assignments including Country Business Manager, Pakistan
and Managing Director Operations and Technology, Central Europe.
In this interview Khizer talks about future and potential of Islamic banking and challenges
thereof. He also sheds light on how the pegging of minimum deposit rate can trigger
private sector credit off- take.
Interview by
Zuhair Abbasi & Sobia Saleem
BRANCHLESS BANKING
SECTION
Omar Moeen Malik,
Schooldays generally start for children by the time they are 4-5 years old. But it seems that Pakistans
5-year old branchless banking (BB) sector is itself schooling the developing world on how its done.
Global financial institutions consider Pakistan as a BB innovation laboratory, while private philanthropists are keen on the socioeconomic spillovers.
Five years after the State Bank of Pakistan (SBP) issued detailed BB regulations a first in South Asia
the non-existent market base has now grown to 7 service providers (more pilots are underway) and
over 100,000 retail agents. As of September last year, the sector was handling transactions worth
nearly $25 million a day or over $700 million a month! All the mobile network operators are now deeply
involved, as are some of the leading commercial banks. Those currently not in the mix also seem
interested some are dipping their toes by partnering with existing players, while the rest of the
fence-sitters are finding it hard to ignore this sector any longer.
This special BB feature which is an acknowledgment of the promise this sector holds to bridge the
gaping financial divide, also an accolade to the SBPs enabling and proactive role intends to highlight
the sectoral performance with a forward-looking agenda. Readers will find pictorials that describe this
growth story over the years. Then there are market insights on key learning and challenges, for which
BR Research interviewed three individuals who have led BB deployments in their respective organisations right from the start. Due to space constraints, we could include these insights from the top 3 BB
service providers (based on SBPs market shares as of September, 2013).
BR Research appreciates the divergent perspectives (especially the telco-bank divide and the
financial inclusion vs. financial access debate) on how best to mainstream the financially excluded
population. We are witnessing a growing private sector appetite in this sector, which is a good omen for
increasing the coverage and usage of financial services in the country.
Key Learnings
Even simple financial services make a huge
difference in the lives of people. This is
evident from the customers we interact
with and the stories we get to hear. But
people want more than just transactional
services. That is why Easypaisa is the first
BB service in Pakistan to venture into more
than just transactional services with
products like Khushaal Beema, Khushaal
Munafa and ATM Cards. Another key
learning is that apart from convenience
and reliability, security is also very important to the customer.
There is still a huge untapped need for
more convenient and more accessible
financial services, especially at the bottom
of the pyramid or those we call un-banked
or under-banked. We estimate a total of
60 million users who have a need to use
branchless banking services and Easypaisa
is only serving 6 million every month.
Challenges
One of the main challenges we face is that
the regulatory requirements for BB
accounts are not attractive to move
Volume (mn)
250
60
200
50
150
100
50
40
1QFY14
30
4QFY13
20
3QFY13
10
Total
Loan repayment, bulk payments and others
Bill Payments & Top-ups
Deposits & Withdrawals
Funds Transfer
2QFY13
1QFY13
4QFY12
3QFY12
Number of agents
2QFY12
120,000
1QFY12
100,000
80,000
60,000
50
100
150
200
250
40,000
20,000
-
1QFY14
Level 3
3QFY13
4QFY13
94,630
Level 2
2QFY13
26,897
Level 1
1QFY13
1,028,775
Level 0
1,492,639
4QFY12
3QFY12
2QFY12
1QFY12
1QFY14
4QFY13
3QFY13
10
15
20
25
2QFY13
1QFY13
4QFY12
3QFY12
2QFY12
1QFY12
0.5
1.5
2.5
3.5
Deposits Rs (mn)
3,000
2,500
2,000
Fund Transfer
1,500
1,000
Cash Deposit in MW
500
-
India
33
South Asia
31
26
(countries average)
38
India
South Asia
44
34
41
34
(countries average)
26
17
15
3
Rural
Urban
Male
Female
25
23
Ghazanfar Azzam
Interviews by
Hammad Haider
e
l
i
b
o
k
M an
B
A payment ecosystem
Currently, mobile banking primarily provides
relatively basic transactions and facilities to the
customers, such as balance inquiry, online funds
transfer, mobile top-ups and bill payments. Bill
payments are limited to utilities and cellular
post-paid bills, and are pretty much similar for
most of the banks. In the near future, the
direction we are likely to see is all the players
attempting to create payment ecosystems to
try and ring-fence their customers by keeping
their money within a closed loop. An example
could be of:
A bank offers salary accounts to the
employees of a corporate client A. These
employees receive their salaries and spend
them in various ways such as using their debit
cards to pay for groceries at a hypermarket
which is also a corporate customer. In turn, the
hypermarket would pay its supplier online
which happens to be corporate client A, thus
completing the loop.
To do that, a two-pronged approach will be
required. Firstly, alliances and loyalty programs
should be offered to the consumer. Secondly,
institutional solutions including salary
processing, cash management/collections, etc.
must be provided.
Digital Wallets
When MCB launched its mobile banking service
in 2009, we were one of the rst banks in the
industry. Till date, we have had over 10 million
transactions worth more than Rs40 billion
performed on our mobile banking platform. We
have used insights gained from our experiences
to develop a digital wallet the recently
launched MCB Lite in our bid to stay ahead of
the competition in the mobile payments space.
We believe digital wallets are the next big thing in
mobile payments and will drive the payments
landscape into a whole new stratum. Traditional
mobile banking is encumbered by the underlying
core banking systems. A digital wallet, on the
other hand, offers endless possibilities for
innovation in payments solutions because it
leverages mobile technology, social connectivity
and the power of cloud computing.
Technological limitations
Perhaps one of the greatest limitations for lack
of innovative products in mobile banking is
technological in nature, especially for banks.
Their legacy core banking platforms are rickety
and do not provide exibility or scalability. It is
very difcult and expensive to upgrade them or
to add innovative features to them. There is also
considerable cost involved with scaling up in
terms of manpower and infrastructure.
Banks can learn from the telecom industry in
Pakistan which has discovered that it makes more
economic sense to share infrastructure with
competitors. The policymakers might be able to
enable such thinking if they relax frameworks to
allow collaboration such as infrastructure sharing.
That will relieve the banks of the burden of
continuously upgrading and maintaining their
infrastructure and they will actually pay more
attention to innovation and design.
Despite these limitations, mobile banking has
outpaced internet banking. Internet banking has
been around since 2003, but mobile banking,
which was introduced around 2009, already has
more registered users (1.4 million vs. 1.3 million).
Though internet banking provides a richer
experience with more features, the trend is
explained by the fact that it requires users to
have email addresses while mobile banking
users are registered through their phones.
In the longer run, however, we feel that if
banks can drive uptake of mobile banking
successfully, this will create a second wave of
internet banking. It is important that banks
dont try to price transactions on both
channels, as this will do more harm than good
discouraging large scale uptake and not
generating much income.
Barclays:
Strategy by design
Shazad Dada
Chief Executive Officer,
Barclays Bank
BR Research: What has been the overarching theme behind Barclays Pakistan?
Shazad Dada: Our clients and customers
are at the center of what we do. Across our
business, we are innovating and redesigning our services around them, while also
reaping the benefits of greater efficiency
and control. While this will be an ongoing
process, some of the results are already
apparent. If you look at the numbers, we
had realignment in 2012, intending to
refurbish and reshape our business, which
certainly has yielded good dividends.
We want to play our local and global
strengths and become the Go-To bank for
multinational and large local corporations,
financial institutions, high net-worth
individuals and development
organizations/foreign missions.
The year 2013 was a testament to our
value-driven strategys popularity where we
continued to take market share and with the
support of our clients, we have seen both
our deposits and assets grow steadily.
BRR: We have seen the administrative
expenses coming down by Rs750 million;
however, the topline seems to be suffering.
Why is that so?
SD: Its by design. We have leveraged our
products, capital, networks and expertise
to drive sustainable progress; however,
there were some clients who we cannot
service effectively. We have to pick our
ground in which to be competitive. We
decided to let go of some clientele
because of their domestic focus. Generally, they do not have FX or cash management needs, so we took a revenue shortfall
Shazad Dada joined Barclays Bank Pakistan as the Chief Executive Officer in October 2010,
with overall responsibility of managing all business operations in the region including
corporate and retail banking. He started his banking career in the USA, joining Bankers Trust
in 1990, which was acquired in 1999 by Deutsche Bank AG, before becoming Chief Country
Officer and Head of Global Banking Deutsche Bank. Prior to taking up his role with Barclays,
Shazad was a Managing Director in the Mergers, Acquisitions and Corporate Advisory
Group at Deutsche Bank Securities.
In this interview with BR Research Shazad, who is also the Chairman of Pakistan Banking
Association, talks about the banks strategy to increase advances, the pegging of deposit
rates to discount rate and his views on the draft Corporate Rehabilitation Act.
Interview by
Ali Khizar and Zuhair Abbasi
Interview by
Zuhair Abbasi & Sobia Saleem
Agri lending
Javeria Ansar
ZTBL
DPBs
PPCBL
MFBs
Rs Bn
180
160
140
120
100
80
60
40
20
0
-20
FY08
FY09
FY10
FY11
FY12
FY13
Source: SBP
Total households
under agricultural
debt
Z.T.B.P
11769
C.B's
50885
MFI's
29157
NGO's
15703
Commission agents
230502
75,084
237762
225783
174993
164723
119656
58050
19536
3185
3154
11,769
43644
70362
69014
73321
63447
34088
12945
2043
1699
1,782
6798
9373
7989
8529
8192
4594
2413
588
624
2,024
7059
8050
3709
4704
2260
951
316
34
49
1,071
3721
3182
3162
2142
1688
618
86
4
35
7,898
51007
51161
39936
35250
26972
13010
3896
654
700
53,594
145900
107712
69889
7227
3270
1377
536
21
36
Amendments in indicative
credit limit and eligible items
for Agri-nancing
State Bank of Pakistan has very recently
enhanced per acre limits for major and
minor crops, orchards and forestry.
According to revised report on Indicative
Credit Limits & List of Eligible Items for Agri
Financing released in early 2014, nancing
limits per acre for rice, wheat, cotton and
sugarcane have been increased to Rs
34,000, Rs 29,000, Rs 39,000 and Rs
53,000, respectively from existing limits of
Rs 19,000, Rs 16,000, Rs 21,000 and Rs
30,000 xed in 2008.
The bank has also re-developed working
tables for assessment of per acre credit for
each crop, which may be used by eld
ofcers in case of variation in limits rather
than indicative lending limits.
Per acre use of fertilizers for major crops
and orchards has been updated.
Size/Classication wise number of farms as
percentage of total number of farms in
province has also been re-dened.
List of eligible items for agri. nancing has
been updated.
Source of credit
10181907
collateral ratio so that more nancing institutions can take up the cause.
But to give credit where it is due, the SBP has
recently been on a bit of an agri bender, having
made amendments to the prudential regulations, indicative credit limits and the list of
items eligible for agri credit earlier this year.
Some of the important revisions to the
regulations are highlighted in the enclosed box.
However, clearly enough, the increased level
of agricultural lending alone cannot raise the
farm productivity and contribute to the
national economy if bottlenecks like water
efciency, land record management, proper
marketing and storage, adoption of modern
techniques, mechanization and other agri
innovations and efcient use of extension
services are not addressed.
Pishin
Sherani*
BALOCHISTAN
Zhob
Killa Abdullah
Ziarat
Quetta
Chitral
Musakhel
Killa Saifullah
Loralai
Mastung
Upper
Dir
Barkhan
Sibi
Kohlu
Nushki
Kachi
Kalat
Chagai
Malakand
Dera Bugti
Hangu Kohat
Khuzdar
Kashmore
Shikarpur
Ghotki
Kambar
Shahdadkot
Sukkur
Dadu
Khairpur
d
hee bad
Shanazira
Be
Attock
Hyderabad
Umerkot
wal
Khanewal Sahi
Vehari
Lodhran
Thatta
Mirpurkhas
Tando
Muhammad
Khan
Tharparkar
Ra
jan
pu
r
Badin
Rahim
Yar Khan
Gujrat
Mandi Bahauddin
Narowal
Gujranwala
Hafizabad
Sheikhupura
Lahore
iot
Chin
Jhang
Karachi
lum
Jhe
Sargodha
Bhakkar
Dera
Ghazi
Khan
Rawalpindi
Sialkot
Khushab
Layyah
Jamshoro
PUNJAB
Chakwal
Mianwali
Sanghar
Matiari
Fa
isa
lab
ad
Bahawalpur
Bah
awa
lnag
ar
SINDH
Tando Allahyar
Dera
Ismail
Khan
Lasbela
Jacobabad
KHYBER
PAKHTUNKHWA
Tank
Islamabad
Awaran
Mapping the
disparity in
bank branch
network
across
Pakistan
Naushahro
Firoze
Karak
Bannu
Lakki
Marwat
Gwadar
Larkana
Jhal Magsi
Panjgur
Kech
Abbottabad
Swabi
Haripur
Nowshera
Peshawar
Jafarabad
Kharan
Washuk
Shangla
Battagram
Buner Mansehra
Mardan
Charsadda
Nasirabad
*No bank
branches were
identified in SBP
statistics for
Sherani district,
Balochistan.
Lower
Dir
Kohistan
Swat
NankanaSahib
Kasur
TobaTek Singh
Okara
Pakpattan
Multan
The
LEGEND
Muzaffargarh
1 - 9,999
10,000 - 19,999
20,000 - 29,999
30,000 - 30,999
40,000 - 49,999
50,000 - 4,999
75,000 - 9,999
100,000 and above
Bank of Punjab:
eyeing the unbanked
Naeemuddin
Khan
President and
Chief Executive Officer,
Bank of Punjab
Naeemuddin Khan has been serving the Bank of Punjab as its President & CEO since Sept
2008. He started his banking career in ANZ Grindlays Bank in 1978 and over the last 35 years
has amassed a wealth of diversified banking experience. He has also previously served as a
member banking on the Corporate & Industrial Restructuring Corporation (CIRC), where he
was responsible for the recoveries of the NPLs of over Rs142 Billion.
BR Research recently sat down with the gentleman to talk about BOPs journey through the
troubled waters it had landed in and his vision and firm hand that has guided the bank back
onto the right course.
Following is a brief transcript of the conversation that took place during the meeting.
Growth avenues
Interview by
Ali Khizar & Javeria Ansar
Islamic banking
branches would also
become functional
during second half of
the current year and the
growth would gain
further momentum
achieving a deposit
base of Rs65 billion by
December, 2014
Interview by
Ali Khizar & Sobia Saleem
Impediments to building
a stronger bond market
Abdul Rehman Warraich
The future of
national
development
depends on higher
devolution and
enabling city/district
governments to
raise money from
capital markets and
invest it in
infrastructure
projects.
Institutional void
The second stumbling block in the development of the bond market is the shortage of
institutions that have a genuine need for
investment in bonds.
Given longer maturity and higher risk of bonds,
only investors with long-term horizons and/or
higher risk tolerances can potentially invest in
bonds. Such investors mainly include DFIs,
pension funds, insurance companies and a few
categories of mutual funds.
The trouble is that due to various reasons,
the growth of these institutions and their
demand for bonds has remained limited. For
instance, DFIs have been unable to raise
long-term funds at competitive rates. Similarly,
public sector pension funds are unfunded in
most cases and therefore, unable to invest in
bonds. Those in the private sector have been
mostly converted into Dened Contribution
Plans which do not use an asset-liability
management framework to manage their
assets. These plans are being managed on the
basis of an asset-only philosophy which, based
Munis, Munis
Pakistan does not have a market for infrastructure
bonds using which federal, provincial or local
governments can borrow for specic purpose of
investment in infrastructure projects. Such
projects are designed in a way that they can earn
enough money over their lifetime to earn an
attractive return on investment required to
establish and run those projects.
Federal government should adopt an explicit
policy that borrowings through long-term
bonds will only be utilised to nance infrastructure projects. This will ensure that the money
raised through long-term bonds will not be
spent on short-term expenses and will
contribute to higher future GDP growth and
employment generation.
The future of national development depends
on higher devolution and enabling city/district
governments to raise money from capital
markets and invest it in infrastructure projects.
This requires making requisite amendments in
federal and provincial laws relating to the
nancial powers of local governments.
It may take a few years to build the capacity
of local government and to create the
institutions for effective oversight of the
nancial activities of local governments but it
will eventually create huge opportunities to
mobilize resources through capital market
securities (mainly long-term bonds).
Bear in mind that federal and provincial
governments have already passed laws relating
to public private partnership laying the
foundations of attracting private capital and
management to the infrastructure sector.
The next step is to strengthen the provincial
planning and development departments so
that they can provide the necessary technical
and nancial support to the government
departments/agencies for developing and
structuring infrastructure projects that are
attractive enough so that private investors can
raise part of the nances by issuing capital
market securities.
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