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Pakistan Banking Perspective 2021 KPMG Taseer Hadi & Co. Chartered Accountants Pakistan Banking Perspective 2021 June 2021 — home.kpmg/pk COLOURS0 / 51 / 141 0 / 94 / 184 0 / 145 / 218 72 / 54 / 152 71 / 10 / 104 109 / 32 / 119 0 / 163 / 161 0 / 154 / 68 67 / 176 / 42 234 / 170 / 0 246 / 141 / 46 188 / 32 / 75 198 / 0 / 126 117 / 63 / 25 155 / 100 / 46 157 / 147 / 117 227 / 188 / 159 227 / 104 / 119 Pakistan Banking Perspective | 2021 Foreword Alhamdulillah, we are beginning to resilience to face the future see a gradual and phased return to developments in banking. During this normalcy with renewed confidence time of rapid developments, and optimism. embracing Environmental, Social and Governance (ESG) agenda is of We are delighted to introduce our immense importance to ensure annual Pakistan Banking perspectives investor confidence in the banking report for the year ended 31 sector in the long-run. December 2020 that analyses the financial results for leading listed Our source of information remain the commercial banks across Pakistan, published financial statements and comparing these with the previous views expressed do not constitute year. This report provides banking advice. industry leaders with brief analysis, We believe this report is insightful comparing banking sector key and a thought-provoking read. We performance indicators and furnishes would be delighted to discuss with forward-looking views and insights you the views outlined within it and from our professionals and industry explore how we could assist your leads. organization in capitalizing on For the first time in this publication potential opportunities. Thank you series, we are proud to include an for your support as we take yet interview with a sector leader about another step forward in our exciting the existing challenges and future client service journey. The comments outlook of the industry. Also we have may be sent to included views and insights from our [email protected]. service line leaders and prominent industry faces on issues that are relevant for now and will be vital 25 June 2021 going forward. In this report, our financial services team explore a wide range of topics of critical importance to the industry. While banks endeavor to manage vast exposures to governance and Amir Jamil Abbasi Rana Nadeem Akhtar compliance issues, disruptions Senior Partner Partner, Advisory around customer experience, KPMG Taseer Hadi & Co. Head of Clients & Markets empathy, culture and technology Chartered Accountants KPMG Taseer Hadi & Co. Chartered Accountants enabled delivery channels are taking priority. CEOs are focusing on building financial and operational © 2021 KPMG Taseer Hadi & Co. a Partnership firm registered in Pakistan and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited 1 by guarantee. All rights reserved. COLOURS0 / 51 / 141 0 / 94 / 184 0 / 145 / 218 72 / 54 / 152 71 / 10 / 104 109 / 32 / 119 0 / 163 / 161 0 / 154 / 68 67 / 176 / 42 234 / 170 / 0 246 / 141 / 46 188 / 32 / 75 198 / 0 / 126 117 / 63 / 25 155 / 100 / 46 157 / 147 / 117 227 / 188 / 159 227 / 104 / 119 Pakistan Banking Perspective | 2021 Contents Performance Highlights 3 Performance Summary 8 Industry Outlook from a Banker’s Perspective 16 Voices & Views 26 Banking in 2030 34 Detailed Banking Results 36 Definitions and Acronyms 76 Glossary 78 Credit Ratings 79 © 2021 KPMG Taseer Hadi & Co. a Partnership firm registered in Pakistan and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited 2 by guarantee. All rights reserved. COLOURS0 / 51 / 141 0 / 94 / 184 0 / 145 / 218 72 / 54 / 152 71 / 10 / 104 109 / 32 / 119 0 / 163 / 161 0 / 154 / 68 67 / 176 / 42 234 / 170 / 0 246 / 141 / 46 188 / 32 / 75 198 / 0 / 126 117 / 63 / 25 155 / 100 / 46 157 / 147 / 117 227 / 188 / 159 227 / 104 / 119 Pakistan Banking Perspective | 2021 Performance Highlights © 2021 KPMG Taseer Hadi & Co. a Partnership firm registered in Pakistan and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. 3 COLOURS0 / 51 / 141 0 / 94 / 184 0 / 145 / 218 72 / 54 / 152 71 / 10 / 104 109 / 32 / 119 0 / 163 / 161 0 / 154 / 68 67 / 176 / 42 234 / 170 / 0 246 / 141 / 46 188 / 32 / 75 198 / 0 / 126 117 / 63 / 25 155 / 100 / 46 157 / 147 / 117 227 / 188 / 159 227 / 104 / 119 Pakistan Banking Perspective | 2021 Pakistan Banking Perspective | 2021 Performance Highlights Despite the pandemic situation and banks were careful in creating overall economic slowdown that general provisions against doubtful was expected in financial year 2020, advances. it proved to be a promising year for On the flipside Covid 19 has truly the banking sector in Pakistan with accelerated the adoption of mobile overall increase in profitability by and internet banking by consumers 30.7% and 37.6% respectively for yielding additional returns for banks both conventional and Islamic with enhanced customer experience banks. Total assets and deposits and lower costs. grew by 14% and 16% respectively. Going forward for banking industry Asset growth was driven mainly by fintech and associated players will increase in investments in continue to be an growing government securities. Whereas, challenge. Volatile economic credit to private sector declined due scenarios and inflationary pressures to slowdown of economic activity. will impact asset quality and Growth in deposits can be applicability of new financial attributed to restricted consumer reporting standards would require spending due to pandemic. more provisions. Regulatory Reduction in interest rates lowered compliance and cyber security the average lending rates threats would further increase significantly but lack of active costs. demand due to economic slowdown restricted the credit Besides all we believe banking offtake. Banks managed operating industry have growth prospects. expenses efficiently which showed With fast increasing use of digital increase of 5%. Banking spread also channels banking users will reduced by 13%. continue to increase and with a speed. Innovative products and Capital Adequacy Ratio of the solutions matching to customer banking sector was at 18.6% at the needs and enhancing customer year end 2020, well above the experience will play a key role. requirement of 11.5%. In the following pages you will find Covid-19 pandemic disrupted the number tables and graphs showing economy including the banking comparative performance along business and both Government and with views and insights from our SBP provided significant relief to professionals and industry leads. businesses. In anticipation of expiry of waivers and relief measures and applicability of IFRS 9 in 2021 some © 2021 KPMG Taseer Hadi & Co. a Partnership firm registered in Pakistan and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited 4 by guarantee. All rights reserved. COLOURS0 / 51 / 141 0 / 94 / 184 0 / 145 / 218 72 / 54 / 152 71 / 10 / 104 109 / 32 / 119 0 / 163 / 161 0 / 154 / 68 67 / 176 / 42 234 / 170 / 0 246 / 141 / 46 188 / 32 / 75 198 / 0 / 126 117 / 63 / 25 155 / 100 / 46 157 / 147 / 117 227 / 188 / 159 227 / 104 / 119 Pakistan Banking Perspective | 2021 Performance Highlights (All Banks) (Amounts in PKR Billion) 18,455 24,849 427 15,865 21,729 327 2020 2019 2020 2019 2020 2019 (In Percentages) 717 8,897 8,687 591 5.67 4.94 2020 2019 2020 2019 2020 2019 188 181 123 510 484 56 2020 2019 2020 2019 2020 2019 © 2021 KPMG Taseer Hadi & Co. a Partnership firm registered in Pakistan and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. 5 D o cument Classification: KPMG Public COLOURS0 / 51 / 141 0 / 94 / 184 0 / 145 / 218 72 / 54 / 152 71 / 10 / 104 109 / 32 / 119 0 / 163 / 161 0 / 154 / 68 67 / 176 / 42 234 / 170 / 0 246 / 141 / 46 188 / 32 / 75 198 / 0 / 126 117 / 63 / 25 155 / 100 / 46 157 / 147 / 117 227 / 188 / 159 227 / 104 / 119 Pakistan Banking Perspective | 2021 Performance Highlights (Islamic Banks) (Amounts in PKR Billion) 2,502 2,032 1,942 47 1,583 34 2020 2019 2020 2019 2020 2019 (In Percentages) 100 1,064 6.16 5.94 77 965 2020 2019 2020 2019 2020 2019 14 55 16.1 9 15.9 50 2020 2019 2020 2019 2020 2019 © 2021 KPMG Taseer Hadi & Co. a Partnership firm registered in Pakistan and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. 6 D o cument Classification: KPMG Public COLOURS0 / 51 / 141 0 / 94 / 184 0 / 145 / 218 72 / 54 / 152 71 / 10 / 104 109 / 32 / 119 0 / 163 / 161 0 / 154 / 68 67 / 176 / 42 234 / 170 / 0 246 / 141 / 46 188 / 32 / 75 198 / 0 / 126 117 / 63 / 25 155 / 100 / 46 157 / 147 / 117 227 / 188 / 159 227 / 104 / 119 Top Performers Pakistan Banking Perspective | 2021 700 622 100 90 600 80 71 500 70 62 400 60 400 51 321 50 279 300 40 226 224 PKR inBillion PKR inBillion 25 30 24 24 178 23 200 161 159 21 16 113 20 14 100 10 0 0 DIB BAF HBL BOP BAH BOK HMB HBL BAF UBL BOP BAH Askari MCB HMB Sindh Meezan Askari Albaraka Meezan 450 10% 393 8.6% 400 8% 350 322 7.0% 6.3% 6.3% 6.1% 6.1% 5.6% 5.7% 5.4% 5.5% 300 6% 5.5% 5.3% 5.2% 221 250 206 196 4% 200 168 162 144 PKR inBillion 150 112 99 2% 100 50 0% DB DIB HBL BAF SCB NBP 0 BOC Islami Faysal MCBIB Meezan ABL BAF Citibank HBL UBL NBP BOP BAH MCB Albaraka Askari Meezan Growth in deposits Spread Average: 4.94% 4% *Albaraka and JS Bank have 100% been excluded from this chart 2.7% 2.7% 2.9% 84% 2.7% 2.6% 2.8% for presentation reasons 2.8% 75% 3% 80% 72% 68% 62% 2.2% 2.3% 60% 2.3% 2.2% 60% 52% 51% 2% 40% 35% 34% 1.3% 40% 1.3% 1% 20% 0% 0% DB HBL NBP ABL BAH BOK UBL SCB NBP BOP BOK HMB MCB ICBC HMB Sindh Islami Askari Askari Soneri Meezan SAMBA Meezan Citibank Percentage Change Average: 30.73% Operating Expenses to Average Deposits © 2021 KPMG Taseer Hadi & Co.
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