Banking (Macro)

8/3/2019 Banking (Macro)

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Macroeconomics Group Assignment:

´Bankingµ Submitted By:

Sarah Umar (M08BBA001)Hafsa Anwar (M08BBA024)Dania Dilshad (M08BBA041)Marreum Siddiq (M08BBA054)Iqra Shaukat (M08BBA060)

BBA(Hons.) Banking & Finance

5 th Semester (2008-2012)

Hailey College of Banking & Finance

University of the Punjab



Macroeconomics Assignment: Banking

Macroeconomics

Table of contents

Acknowledgement ...................................................................................................... 3

Meaning of bank ......................................................................................................... 4

Introduction & History of Banking in Pakistan .......................................... ................... 4

Establishment of State Bank of Pakistan .......................................... .......................... 5

Banks in Pakistan ....................................................................................................... 5

Banking organization in Pakistan ...................... .............................................. ............ 7

Changes introduced in banking system ...................... .................... .......................... .. 7

Economic environment Of Pakistan¶s banking sector ...................... .......................... . 8

Technological advancement in banking sector .......................................... ................. 9

Ways to improve commercial banking in Pakistan ...................... .............................. 11

Role of development financial institutions .......................................... ...................... 12

Current performance of Pakistan¶s banking industry:. .............................................. 14

Contribution towards Pak-Economy ...................................................... .................. 15

SWOT Analysis: ....................................................................................................... 16

References: .............................................................................................................. 18




Macroeconomics

A A c c k k n n o o w w l l e e d d g g e e m m e e n n t t All acclamation to Allah who has empowered and enabled us tocomplete the task successfully. First of all we would like to thank Allah Almighty who really help us in every problem during the

project. we would like to express my sincere and humble gratitude to Almighty whose Blessings, help and guidance has

been a real source of all our achievements in our life.

We would like to admit that we completed this project due to parents who always pray for our success.

We also wish to express our appreciation to our respected teacher

´Ma·m Hamida Batoolµ

Because of whom we·re able to get such precious knowledge¬




Macroeconomics

M M e e a a n n i i n n g g o o f f b b a a n n k k The word ³Bank´ is derived from the Italian word ³BANCO´, which means a table or a counter. In the opinion of the scholars of banking, the reason why this word was

given to the banking business was that when the trade and the business of exchange of money was flourishing in Italy, the money changers used the woodenbenches to carry out their business.

I I n n t t r r o o d d u u c c t t i i o o n n & & H H i i s s t t o o r r y y o o f f B B a a n n k k i i n n g g i i n n P P a a k k i i s s t t a a n n " BANKING BUSINESS " means the business of either or both of the following:

y receiving from the general public money on current, deposit, savings or other similar account repayable on demand or within less than [3 months] ... or witha period of call or notice of less than that period;

y paying or collecting cheques drawn by or paid in by customers

Before the creation of country, the role of Muslims of the areas which were later included in Pakistan was of no significance due to their restricted participation in thebanking sector. There was only a small banks namely Australasia Bank having a fewbranches in Lahore. In 1942, the Australasia bank was housed in a garage of a

trader of Lahore who used to trade at a small scale with Australia during that period.There was only one Bank which was run by the Muslims of the sub-continent was

H abib Bank . It was established in 1941. At that time Quaid-e-Azam Mohammad AliJinnah expressed his desire that another Muslim bank also be established inCalcutta which came into reality when Adamjee established Muslim Commercial Bank a few months before the creation of Pakistan in Calcutta.

When Pakistan came in to being The Habib Bank shifted its Headquarters fromIndia to Karachi. A few of Habib Bank's branches were already in operation inPakistan. The Muslim Commercial Bank also moved its headquarters from Calcutta

to Dhaka and later on to Karachi. At the time of independence, another small banknamely Bank of Bahawalpur also started business from Bahawalpur from December 1947.

Before independence, the financial sector was in the hands of foreign bankssome of them were British by origin. At the time of independence, two major banksincluding Punjab National Bank at Lahore and Comila Banking Corporation wereworking in the then East Pakistan. This trend was so obvious that the total number of




Macroeconomics

bank offices between June 30, 1918 and August 14, 1947 were reduced from 631 to195 only.

E E s s t t a a b b l l i i s s h h m m e e n n t t o o f f S S t t a a t t e e B B a a n n k k o o f f P P a a k k i i s s t t a a n n In the early days of Pakistan, the government worked hard to establish and

strengthen the banking system in Pakistan. These efforts resulted in theestablishment of State Bank of Pakistan which was inaugurated by Quaid-e-Azam onJuly 1, 1948. Zahid Hussain, who was the first Governor of the State Bank devotedall his time and energy to modernize the working of the State Bank.

The establishment of the National Bank of Pakistan was yet another milestone inthe banking history of Pakistan. In September 1949 the rupee value was reducedagainst the Pound sterling which was a major event in the banking circles.

B B a a n n k k s s i i n n P P a a k k i i s s t t a a n n N ationalized scheduled banks

y National Bank of Pakistany The Bank of Punjaby The Bank Of Khyber y The Sindh Bank

Specialized banksy Industrial Development Banky Zarai Taraqiati Bank Limitedy SME Bank

D evelopment financial institutions

y Pak China Investment Company Limitedy Pak Kuwait Investment Company Limitedy

Pak Libya Holding Company Limitedy Pak Iran Joint Investment Company Limitedy Pak-Oman Investment Company Limitedy Saudi Pak Industrial and Agricultural Investment Company Limitedy House Building Finance Corporationy Investment Corporation of Pakistany Pak Brunei Investment Company Limited




Macroeconomics

C ommercial banks

y Allied Bank Limitedy Bank Alfalahy Habib Bank Limitedy

Bank AL Habiby Standard Chartered Bank Limitedy Citi Bank Limitedy United Bank Limitedy Askari Commercial Banky MCB Bank Limited

D iscount and guarantee houses

y First Credit & Discount Corp Limitedy National Discounting Services Limited

Housing finance companies

y Asian Housing Finance Limitedy Citibank Housing Finance Company Limitedy House Building Finance Corporationy International Housing Finance Limited

M icro finance banks

y Micro Finance Bank Limitedy The First Micro Finance Bank Limitedy Khushali Bank Limitedy Karakuram Banky Network Micro Finance Banky Pak Oman Micro Finance Banky Rozgar Micro Finance Bank, Karachiy Tameer Microfinance Bank Limitedy Kashf Microfinance Bank Limited

Islamic banks

y Al-Baraka Islamic Bank (Merged into Al Baraka Bank )y Bank Islami Pakistan Limitedy Dubai Islamic Bank Pakistan limitedy Dawood Islamic Bank Limitedy Emirates Global Islamic Bank Limited (Merged into Al Baraka Bank (Pakistan)

Limited)y Meezan Bank Limited- Premier Islamic Bank In Pakistan




Macroeconomics

B B a a n n k k i i n n g g o o r r g g a a n n i i z z a a t t i i o o n n i i n n P P a a k k i i s s t t a a n n Pakistan¶s financial sector consists of Scheduled Commercial Banks which

include nationalized, foreign, and private banks and Non-banking FinancialInstitutions which include Development Finance Institutions, Investment Banks,

leasing companies, modarabas, and housing finance companies.

Scheduled Banks regulated by the State Bank of Pakistan¶s PrudentialRegulations. Modarabas and leasing companies are being regulated by theSecurities and Exchange Commission of Pakistan which is a body corporate. Amongthe scheduled banks, only Pakistani commercial banks are listed.

The banking sector in Pakistan has been going through a comprehensive butcomplex and painful process of restructuring since 1997. It is aimed at making theseinstitutions financially sound and forging their links firmly with the real sector for promotion of savings, investment and growth.

Commercial banks have been exposed and withstood several types of pressuresince 1997. Some of these are:

1) Multipronged reforms introduced by the central bank

2) Freezing of foreign currency accounts

3) Continued stagnation in economic activities and low growth

4) Drive for accountability and loan recovery.

C ommercial banks operating in Pakistan can bedivided into four categories:1) Nationalized Commercial Banks (NCBs)

2) Privatized Banks

3) Private Banks

4) Foreign Banks

C C h h a a n n g g e e s s i i n n t t r r o o d d u u c c e e d d i i n n b b a a n n k k i i n n g g s s y y s s t t e e m m Despite formulating good policies Pakistan has not been able to attain the

desired results mainly due to poor implementation of the polices. De-regulation of thefinancial sector and capital markets led to rapidly increasing growth of bankingcompanies in the private sector.




Macroeconomics

Many big industrial groups set up their own banks. The new banking sector reforms have also stripped the government of its powers to interfere in a bank¶soperations. All such powers now rest with the SBP only, thereby significantlyreducing political influence in financial institutions.

After the change the SBP has taken a number of steps to introduceprofessional management in the nationalized banks. The strategy of the SBP is to,first improve the quality of new loans and then to tackle the non-performing loansproblems.

All nationalized banks have been asked to curtail their overheads, especiallythe head counts. Professionals from the private sector have been appointed asPresidents to improve the health of nationalized banks and make them moreattractive for privatization.

E E c c o o n n o o m m i i c c e e n n v v i i r r o o n n m m e e n n t t O O f f P P a a k k i i s s t t a a n n · · s s b b a a n n k k i i n n g g s s e e c c t t o o r r In recent years, growth in Pakistan¶s banking sector has been remarkable andunprecedented. Classified as Pakistan¶s and region¶s best performing sector, thebanking industry¶s assets have risen to over $60 billion, its profitability is exceptionaland at an all-time high, non-performing loans (NPLs) are at an all-time low, credit isfairly diversified and bank-wide system risks are well-contained. Almost 81% of banking assets are in private hands. Likewise, the present foreign stake comes to

47% of total paid-up capital of all the financial institutions regulated by State Bank.It pointed out that aggregate financial soundness indicators have improved sinceearly and continue to exhibit strong performance. Having observed theexperiences of the global economy, the way forward for the financial sector isto maintain both the simplicity and transparency of product structures.

Growth in Banking Sector and its profitability is unprecedented. Banking assets rosethree-fold over the last 5 years and industry size is reaching Rs4 trillion. The bankingsector¶s assets to GDP ratio grew from 47.2% in CY00 to 55.6% in CY05 since thegrowth in banking assets outpaced the nominal GDP; these trends are in sharp

contrast from the declining trend in banks¶ assets to GDP ratio during the second half of the 1990s. Supported by privatization and consolidation, assets of the bankingsector have shifted from public to private sector and there is a decline in assetconcentration within the banking sector. This changing structure had far-reachingimplications for the banking sector profitability.

Sustainability of banking sector reforms :




Macroeconomics

What lends confidence to bankers that are fast expanding their stakes and interest inPakistan is the -

(i) high and sustainable economic growth that the country is set on; real GDP inthe past 2 years grew by 8.6% and 6.6% and is now set to register another 7%growth;

(ii) Real consumption expenditure is on the rise and leading the demand growth,boosted by doubling of per capita incomes to $850, a fourfold increase inremittances over few years, rising industrial capacities for consumer durables,automobiles, etc. and growing role of consumer financing and personal loans inmeeting the demand for Consumer goods.

(iii) In recent years, investment spending has gained substantial momentum andwill be rising further as the Government and private sector launch and implementlarge infrastructure projects. The Government has plans to add 5000 MW new power capacities in private sector along with a number of hydral projects, highways andport infrastructure, while catering for the development of large urban infrastructure toupgrade large cities

(iv) foreign direct and portfolio flows is at an all time high and is expected tofurther grow given the economic potential and high returns on equity in bothcorporate and banking sectors.

T T e e c c h h n n o o l l o o g g i i c c a a l l a a d d v v a a n n c c e e m m e e n n t t i i n n b b a a n n k k i i n n g g s s e e c c t t o o r r The internet and the mobile phone that are the two technological advancements thathave profoundly affected all of us in the last decade now on boom. The products of this association are mobile data services.

One area of activity is mobile banking (one of the first areas of commercialtransaction on the wireless internet). Banking is an area that has extended in manydifferent ways in recent years, including telephone and online banking. M-bankingprovides yet another channel for banking services, and in emerging markets,provides some possibility for becoming a primary channel. Mobile banking, asymbiosis of technology and financial services, is the hottest area of development inthe banking sector and is expected to replace the debit/credit card system, online or

net banking in future.

Now focus is on about mobile banking, its use and applications in bank sector. Thetechnology required in mobile banking and some barriers like fraud and security.

At present, modern technology allows banking to exist in four very differentenvironments. The first of which is the rise and rise of telephone banking .




Macroeconomics

Introduced in the early 80s, telephone banking allows customers to access andadminister their accounts using a handset or keyboard attached to a phone line.

The internet also provides individuals with another means to administer their

bank accounts. It was introduced in 1994, internet banking enhanced and developed

the service already provided by phone lines. It allowed customers to conduct taskssuch as fund transfer, investment, and electronic bill payment and complete

applications for other financial features such as loans and credit cards. It is though

the number of internet users who bank online now exceeds 50%. AT M (automated teller machine) has brought numerous changes.

It was invented in 1960. The ATM machine is now a familiar feature on the high

street and provides an accessible and familiar means to access funds for those

going about their daily business or even holidaying and travelling abroad.

Although the most noticeable technological changes to banking have occurred outwith the walls of these financial institutions themselves, there are also other noteworthy developments that aid the experience of employees and customerswithin the banks themselves. Enhanced databases and in-house software packagesmean tellers can access numerous customer accounts at once. For individualsworking within the credit or loan sector, software packages now exist that help tocalculate lending risk as well as borrowing time which ultimately provides a safer,secure and speedier banking experience from the bank and beyond.

N etworking and ISP: All offices of the Banks are accessing the Internet, email and business applicationsacross the installed network.

Operational support for I.T staff: The Information Systems Department provides services and solutions to improveand strengthen SBP¶s technology portfolio and identify future requirements. Oncompletion of the IT project the entire responsibility for the maintenance and supportof the system will be taken over by the ISD. The ISD¶s role is not limited toautomation within SBP, but also enhances and facilitates the growth of technology

and its impact on the operational development of the entire financial industry.

Information Systems Department (ISD) provides departments and subsidiaries witheasy-to-use and reliable in-house developed software systems.

CI B Online Another project, which was made successful with the collaboration of ISD and thePakistan Banking Association (PBA), is CIB (Credit Information Bureau) Online.




Macroeconomics

IT Security:ISD has started work on various IT related Security aspects at Banking sector. Thiscovers:

IT Risk Management

IT Security Policies (drafting, implementing, monitoring, revaluating and revising)

Disaster Recovery Site

Other security implementation and enhancement projects

N etwork SupportThis includes Critical Services monitoring, Routine Networking tasks, end user support, Network Management Station installations, LAN support and Support for Network development team deliverables. Besides this ISD provides Network support

for various other related projects.

W W a a y y s s t t o o i i m m p p r r o o v v e e c c o o m m m m e e r r c c i i a a l l b b a a n n k k i i n n g g i i n n P P a a k k i i s s t t a a n n N ationalized C ommercial Banks ( NC Bs)

NCBs are still the market¶s dominant players, controlling about 51% of the

entire banking sector deposits and 50% of advances. NCBs have the most extensivebranch network with deep penetration in both urban and rural Pakistan - a major competitive advantage over their more urban - oriented Newly Established PrivateBanks and foreign banks. This extensive network has allowed NCBs to tap into alucrative base of low cost and stable deposits. However, this has come at theexpense of high operational costs and a large number of loss making branches.

NCBs have also been victims of political interference, which is reflected by their high share (roughly 58%) of total loan Most of the loss making branches must be shut down defaults. Operational inefficiencies and unusually high loan defaults have resulted in hugelosses, decline in shareholders equity and low yield on earning assets. To overcome these and

to restructure the NCBs it is essential to appoint professionals from the private sector in themanagement.

D enationalized Banks ( DN B)




Macroeconomics

Of the DNBs, both MCB and Allied Bank have managed to show strong performance after privatization. To reduce costs, it is also required to decide for closing down of its unprofitablebranches and redundant workers must be offered ³golden hand-shakes´.

N ewly established private Banks ( NE PB)- Foreign

Banks (FB)Most NEPBs restrict operations to short term trade-related financing, with theexception of the larger private banks such as Askari, Faysal and MCB that havelimited long term exposure.

Increased competition in the banking sector will force smaller banks to either sell outto other larger banks or merge. A small capital base will also restrict branchexpansion of smaller banks, forcing them to focus on relatively smaller retail clients.Hence, it is foreseen that a major merger/acquisition potential in the banking sector.

Competition would also spill over to other customer services such as provision of ATM machines and better banking facilities. Again, only the larger banks would beable to invest in automation technology and branch expansion necessary to improveefficiencies and mobilize cheaper funds FB comprise 24% of total advances anddeposits within the banking system, but as a percentage of total profitability they arefar ahead. A major constraint for foreign banks is the restrictions placed on branchexpansion by the SBP.

This should be according to liberalization policy to relax restrictions on foreign banks inemerging economies.

R R o o l l e e o o f f d d e e v v e e l l o o p p m m e e n n t t f f i i n n a a n n c c i i a a l l i i n n s s t t i i t t u u t t i i o o n n s s Development Financial Institutions in Pakistan are mainly involved to performdevelopmental roles through the provisions of credit to the agricultural and industrialsector. Many of the DFIs are heavily dependent on SBP funding. These are:

PICIC IDBP ADBP NIT ICP HBFC NDFC BEL

Equity Participation Fund




Macroeconomics

ND FC can be ranked first in the DFIs. It was set up by the FederalGovernment in 1973 for the purpose of lending to the public sector and since 1980also to the private sector. Apart from its traditional activities of providing loans,advances and lease financing on a short, medium and long-term basis and acceptingdeposits of fixed maturities, the NDFC is now engaged in bridge financing, trade

financing and , through its merchant banking division, in underwriting, equityinvestment, bond floatation and financial advisory services. With the Government¶sassistance, it is also involved in raising loans in foreign currency for infrastructuraland developmental projects. NDFC continues to play a leading role in development andthe financing of infrastructure to facilitate industrial development (e.g. in the oil andgas sectors, under the private energy financing initiatives).

PICIC was incorporated in 1957 as a medium through which financial and other assistance could be provided to the private industrial sector of Pakistan. Its objectives are:

to stimulate the development of the country by providing finance for the

establishment of new industries as well as for the balancing, modernizationand expansion of existing industries in the private sector; to assist in broadening the base of industrial ownership in the country, thereby

developing the stock market; and to encourage the establishment of viable projects in under- developed regions of the

country.

Th e current activities of PICIC comprise : medium and long term lending, in bothdomestic and foreign currencies, generally for the acquisition of fixed assets; theprovision of loans for working capital; the provisions of underwriting assistance;equity finance; industrial promotion; the provision of guidance and counseling serviceto clients. IDBP succeeded the Pakistan Industrial Finance Corporation in 1961 to promotesmall and medium-sized industrial enterprises in the private sector by way of providing term loans for the establishment of new industrial units and to meet theexpansion, modernization and replacement needs to existing industrial units. Todaynearly 90% share capital is held by the Federal Government and the balance bygovernment-controlled financial institutions or Provincial Governments. IDBP givepriority to the financing of small projects, especially agricultural, export-based or engineering. The dispersal of industrial in less-developed regions, and the promotionof new industrial capacity consistent with the financial targets and socio-economicobjective established in the five year plans.

BEL established in 1980 with the principal objective of accelerating the pace of industrial development, primarily in the private and mixed sectors of the economy. Itwas first sponsored by the SBP and in 1996 government privatized it by selling its26% shareholding to LTV Consortium. New management of a privatized financialinstitution ensuring to provide financial facilities to enterprises in the private sector through equity participation, and profit and loss shares modes of financing.




Macroeconomics

C C u u r r r r e e n n t t p p e e r r f f o o r r m m a a n n c c e e o o f f P P a a k k i i s s t t a a n n · · s s b b a a n n k k i i n n g g i i n n d d u u s s t t r r y y ::..

Pakistan¶s banking sector has remained remarkably strong and resilient,despite facing pressures emanating from weakening macroeconomic environmentsince late 2007. Pakistan¶s economy witnessed a noticeable improvement in themacroeconomic indicators during (2009-2010 ) as the economy grew at a rate of 4.1percent compared with only 1.2 percent in the preceding year. There was substantialdecline in annual inflation and current account deficit. Foreign exchange reservesalso rose to historic highs during the year. Local and foreign banks witnessedaccelerated rise in advances, deposits and investments in the final quarter of 2010,leading to surprise earnings in quarterly results.

The State Bank of Pakistan statistics showed the advances, deposits andinvestments of the banks grew by 6.9 percent, 15.8 percent, and 9.7 percentrespectively in 4Q 2010 with calendar year 2010 growth totaling to 6.8 percent, 18.5percent and 27.8 percent respectively.

The accelerated growth in the asset base of banks, leading to the full year growth to 13.4 percent to reach Rs 6.8 trillion or $ 79 billion. Advances andinvestments led the way, as both have registered sharp growth in 4Q and up 6.9percent and 15.5 percent to reach Rs 3.5 trillion or $ 40.8 billion and Rs 2.1 trillion or $ 24.5 billion respectively.

The credit to the private sector has also shown an encouraging trend with Rs113 billion disbursed so far in the current FY11, particularly on account of commodityfinancing which has further been aided by high commodity prices. Deposits rose by9.7 percent to record an 18.5 percent rise in the calendar year and reach Rs 5.1trillion $ 59.8 billion. The increased liquidity in the system is due to high monetaryaggregate (M2) growth, pushed up by high government borrowing and favorableBOP. Further, with 6 month KIBOR at 13.19 percent up 84bps on quarterly basis and80bps on a yearly in 4Q.

The net Interest Margins are likely to head north and keep reported earningsstrong.The fiscal deficit bounced back to 6.3 percent of GDP in FY10, i.e., 1.1

percentage points higher than in the previous year. FY10 fiscal performance wascharacterized by continuing expansion in fiscal and quasi-fiscal operations thatcrowded out and otherwise undermined private sector activities, supported thepersistence of double-digit inflation, and increased the total public debt and liabilitiessubstantially, from 68.7 percent of GDP in FY09 to 69.5 percent in FY10.

Although the quarterly data usually comes in strong off take growth, the 4Q2010 is highest since 2007. Investments, on the other hand continue to take up




Macroeconomics

increased share of liquidity generated via high deposits, more so after the discountrate hikes in 2H 2010; and returns earned from these remained an earnings booster for 4Q.However, the size of provisioning losses as industry wide expenses increasedup to Rs 15.9 billion in 2010, which is bound to eat away profitability in some cases.

Referring to recent unprecedented floods in the country, it is predicted that thevarious FY11 macroeconomic targets have suffered a serious setback early into theyear as large areas of the country were devastated by widespread rains andunprecedented floods. In this backdrop, GDP growth is likely to be between 2percent to 3 percent in FY11, average annual inflation is expected to be 13.5 percentto 14.5 percent while the fiscal and current account deficits are likely to be between5.0 percent to 6.0 percent of GDP, and between 3.0 percent to 4.0 percent of GDP.Furthermore, it projected that workers¶ remittances are likely to stay between $9.5billion to $10.5 billion while exports and imports are likely to be between $20 billion to

$21 billion and $34 billion to $35 billion, respectively. .

C C o o n n t t r r i i b b u u t t i i o o n n t t o o w w a a r r d d s s P P a a k k - - E E c c o o n n o o m m y y Banks play very important role in the economy of a country and Pakistan is no

exemption. Banks in Pakistan account for 95% of the financial sector. Pakistan has awell-developed banking system, which consists of a wide variety of institutionsranging from a central bank to commercial banks and to specialized agencies tocater for special requirements of specific sectors. The country started without anyworthwhile banking network in 1947 but witnessed phenomenal growth in the firsttwo decades. By 1970, it had acquired a flourishing banking sector.

Pakistan's banking sector has remained remarkably strong and resilientduring the world financial crisis in 2008±09, a feature which has served to attract asubstantial amount of FDI in the sector. Stress tests conducted on June 2008 dataindicate that the large banks are relatively robust, with the medium and small-sizedbanks positioning themselves in niche markets. Banking sector turned profitable in2002. Their profits continued to rise for the next five years and peaked to Rs 84.1($1.1 billion) billion in 2006.

The era of 90s was the climax of privatization, deregulation and restructuringin the domestic banking industry and financial institutions. The Government onlyowns the National Bank but 80% of bank assets are in private sector. Banking assetsrose three-folds over the last five years and the industry size is reaching Rs 4 trillion.The contribution of banking sector to GDP ratio is 55.6%. Pakistan has been ranked.2nd in performance and efficiency indicators among the South Asian countries by theWorld Bank. There are 68 scheduled banks of which the top five have 50% of the




Macroeconomics

market share. Banking industry, in Pakistan, is currently under a wave of Mergersand Acquisitions (M & As).

There are on average 3 M & As per year.1. Public Sector Commercial Banks: National Bank of Pakistan, First Women BankLimited, The Bank of Khyber, The Bank of Punjab2. Local Private Banks: Askari Commercial Bank Limited, Bank Al-Falah Limited,Bank Al Habib Limited, Bolan Bank Limited, Faysal Bank Limited, PICIC CommercialBank Limited, UBL, MCB, ABL,3. Foreign Banks: ABN Amro Bank, Al Baraka Islamic Bank, American Express, CITIBank, Deutsche Bank, Emirates Bank, IFIC, Hong Kong Shangai BankingCorporation, Standard Chartered Bank, etc.

S S W W O O T T A A n n a a l l y y s s i i s s :: SWOT analyses take into account the strengths, weaknesses, opportunities andthreats face by a business, an organization or operation, in serving customers,stakeholders and their own employees. A SWOT analysis of the banking industry willlist these four components and illustrate for executives and management the areasthe industry is performing well and also the area where the performance is not sowell. The SWOT also highlights the areas where there is opportunity to developfurther and areas where there is potential to be hurt in the future.

S trengths

The "Strengths" portion of the banking industry¶s SWOT analysis is a list of theinternal operational elements where the banking industry is succeeding or excelling.These elements need to refer to features the industry can control and has a directpower to change.

The banking industry has the following strengthen points:

y The banking industry¶s has record-high recent annual returns.y It has diversified investment portfolio offeringsy It has decreases it¶s transaction and trading fees.y An increase in the number of ATM machines.

The market share of banking industry¶s has also increase in recent year.

W eaknesses

The "Weaknesses" element of the banking industry¶s SWOT analysis is a list of theinternal operational elements the banking industry needs to improve upon. These




Macroeconomics

elements need to refer to features the industry can control and has a direct power tochange.

The banking industry's weaknesses include high loan rate.

y Low bond credit ratings.y An increased number of outstanding junk bonds.y An increase in loan-sharking activity.y An increased number of high-risk investment options.

Opp ortunities

The "Opportunities" part of the banking industry¶s SWOT analysis is a list of theexternal environmental elements the banking industry can potentially take advantageof in the near future or long-term. These external environmental elements should notreflect the internal components of the industry, but rather the factors or features

outside the industry¶s control.The banking industry¶s opportunities include:

y A growing economy.y Banking deregulation.y Increased client borrowing.y An increase in the number of banks.y An increase in the money supply.y Low government-set credit rates and larger customer checking account

balances.

Threats

The "Threats" component of the banking industry¶s SWOT analysis is a list of theexternal environmental elements that can potentially harm the banking industry.These external environmental elements do not reflect the internal components of theindustry, but the factors or features outside the industry¶s control.

y The banking industry¶s threats could include:y A declining economy,y

An increased banking regulations.y Larger capital gains taxes.y New high-risk investment vehicles or higher health care costs.

It¶s important to realize these examples are not black and white. For example,³new high-risk investment vehicles´ are inherently a liability because they includeincreased risk, but depending on the financial stake and position, it could be anopportunity or threat.




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R R e e f f e e r r e e n n c c e e s s :: y Sbp.com.pky Google.comy Wikipedia.orgy www.economywatch.com/world_economy/pakistany www.finance.gov.pky www.dawn.com/tag/pakistan-economy

Banking (Macro)

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