Topic to be Covered

‡ Origin of the word ‡ Different roles of Commercial ‡ Challenges and issues of CB͛S of today ‡ Commercial ‡ 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 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, , Muslim and 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

‡ 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 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 , 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

‡ 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