Topic to be Covered
Origin of the word Different roles of Commercial Banks Challenges and issues of CB͛S of today Commercial Banking in Pakistan Nationalization of Commercial banks Reasons for Nationalization Advantages and Disadvantages Aftereffects Topic to be Covered
Privatization and Deregulation of Financial Sector Commercial Banking Scenario in Pakistan Some of the Issues in Commercial Banks Key Commercial Banks Islamic banking Key Islamic banks Commercial Banks
Commercial banks are Banks that provide checking accounts, savings accounts, and money market accounts and also accepts Time Deposits
Derived from the word BANCO
Challenges and Issues related to CB¶s of Today
Highly competitive environment
Cost of operation has increased
Adaption of latest technology is an issue
The sector is going through price war Challenges and Issues related to CB¶s of Today
Privatization and globalization has opened the gates for new entrants
More focus on CRM Commercial Banking in Pakistan
At the time of partition only 487 banks were located in Pakistan
It was decided that Reserve Bank of India will serve Pakistan till 1948
There was a bad condition of this sector initially
The number of scheduled banks decreased to 195 Commercial Banking in Pakistan
There were only two scheduled banks, owned and operated by Muslims, these were Australasia Bank and Habib Bank
They accounted for 6% only
State Bank came into existence on 1st July 1948 Commercial Banking in Pakistan
1956 the economic activities went to new height
Ayub khan took over in 1958 and 256 banks grew
In 1970͛s there was great pressure on banking sector due to unstable political situation Commercial Banking in Pakistan
The banking sector has shown tremendous growth over the years.
It is believed that Banking sector has largely failed to utilize the country resources effectively. This system was not functioning well so Nationalization of Commercial Banks was favored. Nationalization
1974 there were 23 scheduled banks in Pakistan
The total number of branches of these banks in Pakistan was 2942 out of which 2906 branches were opened by Pakistani Banks.
All the banks had accumulated Rs. 15,800 million as deposits Nationalization
All the banks were nationalized and merged them into 5 Banks
These included: National Bank of Pakistan, Habib Bank of Pakistan Limited, United Bank Limited, Muslim Commercial Bank and Allied Bank Limited Nationalization
Concentration of Wealth of Few Hands
Inappropriate Use of Credits
Unbalanced Distribution of Credit
Protection of Black Money Nationalization
Exploitation of Bank employees
Low efficiency of Foreign Bank branches
Ineffective Monitory Policy of the State Bank
Unhealthy Competition amongst Banks Advantages of Nationalization
Non-development Expenditure was cut down by the Banks
Better working of the Foreign bank Branches was there.
Fair Distribution of Wealth
There was active control on Supply of Credit Advantages of Nationalization
Development of Banking in the Country:
Banking Facilities for Backward and Underdeveloped Regions was provided
Growth of the Level of Employment
Development of the Agriculture Sector
Proper Distribution of Loans After Effects of Nationalization After Nationalization it was expected that every thing would be fine but it didn͛t happened so.
High Intermediations cost
Poor Management/ with narrow product range
Poor loan recovery from the customer
Piling up of NPL͛s Privatization Privatization implies reducing government intervention in the economy by allowing more and more private ownership of industry and enterprise Reduction of politicized lending
Improved regulation
Proceeds from privatization to be used to retire expensive debt.
Ensuring the quality of services. Privatization
Broaden and deepen the capital market.
Lower transaction cost
Strengthen Public Finances Privatization of MCB
Privatized in 1991
It has 1026 branches, 8 Islamic Branches and 300 ATM͛s
Customer base is of approximate 4 million
Since privatization NPL͛s have gone down
Profit has increased Privatization of MCB
Growth is based on quality of service and technology that it is using
It has largest ATM network
Provides innovative products and services
Fourth Pakistani company to be listed in London stock exchange The Privatization Of ABL
Formerly known as the Australasia Bank
Privatized in 1991 when government disinvested its 26% shares
Further 25% of its shares were purchased by the staff in 1993
ESOP was introduced in 1994 The Privatization Of ABL
After privatization Bank did not show any improvement
There was jump in NPL͛s
Made huge losses between the financial year 2000 to 2002
ROA had been negative The Privatization Of ABL
In August 2004 capital Reconstruction of the Bank was done
Ownership was transferred to Ibrahim leasing Co. in May 2005
Bank has managed to increase its market share
Presently the bank is expecting recoveries
Privatization of UBL
UBL was established in 1959
In 1971 the Government of Pakistan Nationalized it
In 2002, the Government of Pakistan sold it in an open auction to Abu Dhabi and Best Way group
It has 1327 subsidiary branches Privatization of UBL
49 branches of UBL are in Lahore
The ͚Largest International Bank award by the CFA for 3 consecutive years (2003 to 2005)
Abu Dhabi Group and Best way Group and 51% of shares Privatization of UBL
Present situation
Profitability of UBL is up by 1%
Non Interest Income up by 53
Net Interest income is up by 9%
ROA and ROE has also increased
Deposits increased by 2% Privatization of Habib Bank Limited
Established in Pakistan in 1947
Largest private sector bank
Customer base exceeded to five million
It is the largest and oldest bank in Pakistan with a network of 1425 branches and 55 branches outside Pakistan Privatization of Habib Bank Limited
HBL have a domestic market share of 40
Before partition HBL played a vital role in mobilizing the funds of the Muslim community of India Agha Khan Fund for Economic Development On June 13, 2002 Pakistan͛s Privatization Commission announced that the Government of Pakistan had formally granted the Agha Khan Fund for Economic Development (AKFED) rights to 51% of the shareholding in HBL, against an investment of PKR 22.409 billion
After merger 90.5% were given to HBL and 9.5% to Allied bank Agha Khan Fund for Economic Development
In 2008 its performance has improved.
Advances increased by 8% and Deposits increased by 10% over December 31, 2007 Commercial Banking Scenario in Pakistan
Sector has been strong despite of pressures
In near future Banking Sector will take a new shape with mergers and acquisitions.
The Commercial Banking sector strength will shrink to 20-25
Presently 80-85% shares of Pakistan͛s banking sector is in private hands Commercial Banking Scenario in Pakistan Privatization has increased corporate earning
The sector faced crisis in 2007 due to Law and order situation with the tragic assassination of Benazir Bhutto
All Commercial Banks profit after tax declined to Rs. 16.455 billion in first quarter 2009 Some of the Issues in Commercial Banks
Transformation of existing interest based financial system into Riba free systems
Enhancing paid up capital requirements.
Ensuring recovery of restructured loans and monitoring spreads Some key Commercial Banks
Bank Alfalah
Fifth largest bank in Pakistan in terms of assets
Started its operations in Pakistan in 1997 Some key Commercial Banks
Bank Alfalah
It has 55 million credit card users
Present authorized capital is 8 billion
Deposits have grown to Rs. 287.7 billion
The Advances have grown to 184.9 billion Some key Commercial Banks
Bank Alfalah
Trade business has increased to Rs. 150 billion
The bank sold 48.8 million of its holding in Warid Telecom
Due to this transaction the bank earned Rs. 1.7 billion Some key Commercial Banks
NIB Bank
NIB Bank Ltd was incorporated in March 2003
NIB Bank is proudly serving nearly half a million customers
It the 6th largest bank in Pakistan
Paid-up capital 27.5 billion Some key Commercial Banks
NIB Bank NIB business units include: ± Small Medium Enterprises and Commercial Banking Group.
± Corporate and Investment Banking Group.
± Consumer and Small Enterprise Group.
± Treasury and Financial Institutions Group Some key Commercial Banks
Askari Bank
Incorporated in Pakistan on October 9, 1991
Listed at Karachi, Lahore and Islamabad stock exchange
Deposits base was Rs. 131.84 billion in 2006 Some key Commercial Banks
Askari Bank
Declared Best Retail Bank in Pakistan 2008
2008 PACRA gave A1+ rating for short term and AA for long term
Total equity of PKR 12.27 billion and total Assets of PKR 182.17 billion Some key Commercial Banks
Askari Bank
For quality services to valued customers the bank has received several awards from renowned National and International organizations Some key Commercial Banks
National Bank of Pakistan
Its Pakistan͛s premier bank
Determined to set higher standards
Foster economic growth through aggressive and balanced lending policies, Assets of over US $ 9.3 billion Some key Commercial Banks
Standard Chartered Bank
Standard Chartered is listed on both the London Stock Exchange and the Hong Kong Stock Exchange
History of over 150 years
Standard Chartered is well positioned in the emerging trade corridors of Asia, Africa and the Middle East
Derives over 90% of profits Asia, Africa and the Middle East Some key Commercial Banks
SILK Bank
Formerly Saudi Pak Bank
The Bank operates through 66 Branches
Institutional sponsors from Nomwra, IFC and bank MUSCAT Islamic Banking in Pakistan
It refers to the banking system that operates in context to Islamic rules
Steps were taken in 1978 for setting the Islamic Financial System
Islamic system was fully applied on 1984 Islamic Banking in Pakistan
In Islamic mode it can operate as:
Financing by lending
Financing through trade related
Purchase of trade bills
Leasing Islamic Banking in Pakistan
In Islamic mode it can operate as:
Financing for development of property on the basis of development charges
Hire purchase
Investment type of modes of financing Islamic Banking in Pakistan
Islamic Banking is the growing fast.
SBP has played a great role in development of this sector
These banks have 307 branches in Pakistan
Meezan bank is largest Islamic Bank in Pakistan Some key Islamic financial institutions
Dubai Islamic Bank
World͛s first full fledged Islamic bank
It is undisputed leader in its field
Close personal service and understanding forms the basis of all its relationship
The bank remains true to its roots as a customer- centered organization Some key Islamic financial institutions
Emirates Global Islamic Bank
Started operations in February 2007 It has 10 branches Sponsored by leading investors from the United Arab Emirates and Saudi Arabia
Dec 2008 posted loss after tax of Rs 260 million Some key Islamic financial institutions
Bank Islami Pakistan Limited
Operation in Pakistan since April 7th 2006
It has 19 branches
Sponsoring the First and largest asset management company, ABAMCO Limited and the first Islamic Fund in Pakistan. Some key Islamic financial institutions
Meezan Bank
First incorporated on January 27, 1997
In 2002 it was given the status of full fledge commercial bank
Main shareholders Pak Kuwait investment Company Islamic Development Bank of Jeddah͛ and Shamil Bank of Bahrain Some key Islamic financial institutions
Meezan Bank
Administrative expenses increased with the rate of 50%, this was mainly because of opening of new branches thus increasing the administrative expenditure. Some key Commercial Banks