Consumer Banking Industry

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The report comprises our focus on consumer banking, which regards the phenomena where banking institutions intend extensive and regular transactions with the general public, rather than organizations or institutes.

Transcript of Consumer Banking Industry

Consumer Banking Industry of Pakistan

Dec 2009Group Name: Victor s Clan Group Members: Shaad Alvi (3697) Tayyeba Mazhar (3822) Ufaq Ashfaque (3451) Jawad Ahmed Qureshi (2895)

Table of ContentsConsumer Banking Industry of Pakistan .............................................................................................................................. 1 Table of Tables.................................................................................................................................................................................... 8 Table of Figures.................................................................................................................................................................................. 9 Table of Equation ........................................................................................................................................................................... 10 Abbreviations ................................................................................................................................................................................... 11 Keys for the Chart ..................................................................................................................................................................... 11 Banks ............................................................................................................................................................................................... 12 Acknowledgment ........................................................................................................................................................................... 13 Executive Summary ...................................................................................................................................................................... 14 Industry Outline and Size........................................................................................................................................................... 16 Consumer Banking ................................................................................................................................................................... 16 Consumer Banking Industry Worldwide ...................................................................................................................... 17 Consumer Banking Industry of Pakistan ...................................................................................................................... 17 Products ......................................................................................................................................................................................... 19 Industry Size ................................................................................................................................................................................ 20 Number of Companies:...................................................................................................................................................... 20 Number of branches: .......................................................................................................................................................... 21 Number of Units Produced: ............................................................................................................................................ 22 Industry Dimension and Statistics ........................................................................................................................................ 23 Number of New Branches Opened/Closed .................................................................................................................. 24 Total Employment .................................................................................................................................................................... 28 State of the Banking Industry of Pakistan ......................................................................................................................... 30 State of the Banking Industry of Pakistan in the year 1947 ............................................................................... 30 Nationalization and the Banking Industry................................................................................................................... 31 Background (1947-74) ..................................................................................................................................................... 31 2|P a ge

Nationalization & Post nationalization Achievements (1974 - 86)............................................................. 33 Denationalization and the Banking Industry.............................................................................................................. 36 Financial Sector Reforms (1987 onwards)............................................................................................................. 36 Privatization of Banks ....................................................................................................................................................... 36 New Pakistani Commercial banks ............................................................................................................................... 37 State Bank of Pakistan ....................................................................................................................................................... 38 Chronology ................................................................................................................................................................................... 39 Major Player s Profiles................................................................................................................................................................. 46 Habib Bank Limited (HBL) .............................................................................................................................................. 47 National Bank of Pakistan (NBP) ................................................................................................................................. 51 United Bank Limited (UBL) ............................................................................................................................................ 54 Collective Action Agents ........................................................................................................................................................ 57 World Trade Organization......................................................................................................................................................... 61 WTO Regulations and Its Impact on Pakistan Banking Industry ..................................................................... 61 IMPACT ON PAKISTAN BANKING INDUSTRY: ..................................................................................................... 62 International Treaties and their impact: ................................................................................................................. 63 Impact on Pakistan.............................................................................................................................................................. 64 IMPACT ON CHINA MUCH WORK REQUIRED ................................................................................................... 65 BANKING IN NORWAY: BETTER ................................................................................................................................. 66 General Agreement on Trade and Services WTO ................................................................................................. 67 Article-I ..................................................................................................................................................................................... 67 ANNEX ON FINANCIAL SERVICES............................................................................................................................... 68 SECOND ANNEX ON FINANCIAL SERVICES ........................................................................................................... 71 Economic Impact of WTO .......................................................................................................................................................... 72 Economic Impact of WTO in Pakistan ............................................................................................................................ 72 Economic impact of WTO in other countries.............................................................................................................. 73 Incentives ........................................................................................................................................................................................... 75 3|P a ge

Incentives to the Banking Industry of Pakistan ........................................................................................................ 75 Incentives Offered in Past ..................................................................................................................................................... 75 FUNCTIONAL STRATEGIES ............................................................................................................................................ 76 Incentives Being Asked by the Industry........................................................................................................................ 78 Incentives Offered in Other Countries ........................................................................................................................... 79 Service Delivery Process ............................................................................................................................................................ 82 Pricing and Costing ....................................................................................................................................................................... 83 Fixed and Variable Costs in the Banking Industry................................................................................................... 83 Fixed Cost ................................................................................................................................................................................. 83 Variable Costs ........................................................................................................................................................................ 84 List of Available Products/Brands ................................................................................................................................... 85 HBL Credit Card Schedule of Charges for Credit Card ...................................................................................... 85 HBL PLS Savings Account............................................................................................................................................. 86 NBP PLS Saving Account............................................................................................................................................... 86 UBL Credit Card Schedule of Charges for Credit Card ...................................................................................... 86 UBL UNIFLEX Account ...................................................................................................................................................... 86 Pricing Model .............................................................................................................................................................................. 86 Key Issues and Their Solutions ............................................................................................................................................... 87 Key Issues in Economy ........................................................................................................................................................... 87 Key Human Resource Issues ............................................................................................................................................... 87 Effective work force: .......................................................................................................................................................... 88 Right people:........................................................................................................................................................................... 89 Compensation:....................................................................................................................................................................... 89 Job satisfaction: ..................................................................................................................................................................... 89 Morale boosting:................................................................................................................................................................... 90 Information sharing: .......................................................................................................................................................... 90 Key Hurdles in Marketing ..................................................................................................................................................... 90 4|P a ge

Impact of Political Parties/Bureaucracy ....................................................................................................................... 91 Proposals Presented ................................................................................................................................................................ 91 Our Proposals.............................................................................................................................................................................. 92 Human Resources Situations ................................................................................................................................................... 93 Human Resource Requirements ....................................................................................................................................... 93 Job Titles, Job Descriptions, and Job Specifications................................................................................................. 94 Branch Manager.................................................................................................................................................................... 94 Service Quality Coordinator ........................................................................................................................................... 94 Sales ............................................................................................................................................................................................ 95 Customer Call (Call Center Officer) ............................................................................................................................ 95 IT Security Officer ................................................................................................................................................................ 96 Specific Training Institutions.............................................................................................................................................. 96 Porter s Six Forces Model .......................................................................................................................................................... 97 Internal Rivalry .......................................................................................................................................................................... 97 Concentration: ....................................................................................................................................................................... 97 Fixed and Variable Costs:................................................................................................................................................. 97 Capacity to Differentiate: ................................................................................................................................................. 98 Pricing Behavior: .................................................................................................................................................................. 98 Growth:...................................................................................................................................................................................... 98 Bargaining Power of Suppliers .......................................................................................................................................... 99 Supplier Concentration:.................................................................................................................................................... 99 Forward Integration: ......................................................................................................................................................... 99 Switching Cost: ...................................................................................................................................................................... 99 Heterogeneity: ....................................................................................................................................................................... 99 Bargaining Power of Buyers..............................................................................................................................................100 Buyer Concentration: .......................................................................................................................................................100 Backward Integration:.....................................................................................................................................................100 5|P a ge

Switching Costs:..................................................................................................................................................................100 Heterogeneity: .....................................................................................................................................................................100 Threat of Substitutes .............................................................................................................................................................101 Availability.............................................................................................................................................................................101 Suitability of Alternatives:.............................................................................................................................................101 Potential Entrants ...................................................................................................................................................................102 The Government/The Public ............................................................................................................................................103 Context Analysis ...........................................................................................................................................................................104 Defining the Subject ...............................................................................................................................................................104 Trend Analysis..........................................................................................................................................................................104 POLITICAL TREND ANALYSIS .....................................................................................................................................104 ECONOMIC TREND ANALYSIS ....................................................................................................................................105 SOCIAL TREND ....................................................................................................................................................................108 TECHNOLOGICAL TREND ANALYSIS ......................................................................................................................108 LEGAL TREND ANALYSIS ..............................................................................................................................................108 Industrial Analysis Strength and Weaknesses .....................................................................................................109 STRENGTHS ..........................................................................................................................................................................109 WEAKNESSES ......................................................................................................................................................................109 Defining Opportunities and Threats .............................................................................................................................110 OPPORTUNITIES ................................................................................................................................................................110 THREATS ................................................................................................................................................................................110 SWOT-I MATRIX ......................................................................................................................................................................110 Strategic Plan ............................................................................................................................................................................111 Appendices 1 ..................................................................................................................................................................................112 Appendices 2 ..................................................................................................................................................................................114 Appendices 3 ..................................................................................................................................................................................116 Appendices 4 ..................................................................................................................................................................................117 6|P a ge

Appendices 5 ..................................................................................................................................................................................119 Bibliography ...................................................................................................................................................................................121

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Table of TablesThe products that are included in consumer banking are in appendices 2 in < Table 1: Product Descriptions>. .................................................................................................................................................................................. 19 Table 2: Consumer Bank s Branches .................................................................................................................................... 22 Table 3: City Wise Distribution ............................................................................................................................................... 23 Table 4: Total Employment for 5 years .............................................................................................................................. 29 Table 5: No. of Scheduled Banks as of July 1st 1948 ..................................................................................................... 31 Table 6: Position of banks after Nationalization............................................................................................................ 33 Table 7: Commercial Banks Credit from 1972-1987 ................................................................................................... 34 Table 8: Bank Rankings............................................................................................................................................................... 46 Table 9: HBL Credit Card Charges ......................................................................................................................................... 85 The schedule is in appendices 5 < Table 10: UBL Credit Card Charges> .......................................................... 86 Table 11: UBL Uniflex Account Rates .................................................................................................................................. 86 Table 12: Cash Reserve Requirements .............................................................................................................................105 Table 13: Statutory Liquidity Requirement ...................................................................................................................105 Table 14: Discount Rate Imposed by SBP........................................................................................................................106 Table 15: Products offered by Consumer Banks..........................................................................................................113 Table 16: Product Descriptions ............................................................................................................................................115 Table 17: UBL Credit Card Charges.....................................................................................................................................120

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Table of FiguresFigure 1: Classification of Banking Industry .................................................................................................................... 16 Figure 2: No. of People Employed from 1973-1986 .................................................................................................... 35 Figure 3: Branch Percentages .................................................................................................................................................. 46 Figure 4: Habib Bank Corporate Information ................................................................................................................. 50 Figure 5: NBP Corporate Information ................................................................................................................................. 53 Figure 6: UBL Corporate Information ................................................................................................................................. 56 For Service Delivery Process, see appendices 3 and 4 . ............................................................................................................................................................. 82 Figure 9: Rate of Inflation from 1950-2009 ...................................................................................................................107 Figure 10: The Loan Process ..................................................................................................................................................116 Figure 11: Credit Card Processing Form ..........................................................................................................................118

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Table of EquationEquation 1: Price (Interest rate) for Loan........................................................................................................................... 86

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AbbreviationsKeys for the ChartCA: Current Account CYA: Current Yield Account OD: Over drafting S.Ac: Saving Account Dep.A: Deposit Account Forex: Foreign Exchange Accounts Lkrs: Lockers ATM: ATM Cards Deb: Debit Cards Crdt: Credit Cards Prep: Prepaid Cards Chq: Cheques Othrs: Other Paper Instruments Pers. Fin: Personal Finance Hme.Fin: Home Finance Auto: Auto Finance Boat: Boat Finance Stud. Loan: Student Loans Bus. Fin: Business Finance INS: Insurance Mob.B: Mobile Banking E-B: E-Banking Trav.C: Traveler s Cheque Fun.T: Funds Transfer Util-Bill: Utility Bill Payment

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BanksBank Alfalah Limited ABL Allied Bank Limited AHB Arif Habib Bank Limited Askari Bank Atlas Bank Bank Al-Habib Barclays Bank Faysal Bank HBL Habib Bank Limited Habib Metropolitan Bank JS JS Bank Ltd. KASB KASB Bank MCB Muslim Commercial Bank Ltd. MyBank Limited NIB NIB Bank Limited SAMBA SAMBA Bank Limited Silk Bank Soneri Bank UBL United Bank Limited Bank of Punjab Citibank SCB Standard Chartered Bank Limited RBS Royal Bank of Scotland HSBC Hong Kong Shanghai Bank Corporation First Women Bank Ltd National Bank of Pakistan Ltd

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AcknowledgmentFirst of all we would like to thank Almighty Allah who has guided us the way for a bright future. We would like to acknowledge the help provided by our teacher to make this project a success.

We would like to acknowledge our teacher Mr. Qazi Salman, who helped us a lot in the preparation of this project. He was always full of energy and willing to teach students the concept about analyzing a report critically with his working and practical experiences.

We are also thankful to our parents who accommodated us during those long hours to work in our project development and all the friends and colleagues who equally encouraged us.

We would like to appreciate the co-operation we got from our class mates at PAF KIET, which boosted our moral and encouraged us to strive for better results.

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Executive SummaryBanking has been labeled as the backbone of an economy. This sector intends to tailor all sectors, such as manufacturing, service, etc. It provides services to the society such as lock-up facilities, accepting deposits, advancing loans, thereby providing strength and strong foundation to maintain smooth economic conditions in the country. The report comprises our focus on consumer banking, which regards the phenomena where banking institutions intend extensive and regular transactions with the general public, rather than organizations or institutes. Consumer banking has greatly evolved from being just a combination of firms to a multi-tiered, complex system, entertaining increasing competition and catering consumers in response to their demands and requirements. Looking back to the previous years, the global banking industry has seen the worst of outcomes and throughputs with cases and examples such as Lehman Brothers, Merrill Lynch, etc., who faced tremulous situations, thereby leading the entire world in the black hole of irrecoverable amounts and irreversible losses. According to statistics and the forecasts of the many finance heads of authority, 2008 is one year that will always be an ugly dream, that shall haunt for all times to come and will always be remembered for the shocks it bought with it. Coming to the present scenario and looking forward into the future, banking industry has come on the verge of recovery and revival at a snail s pace. In today s modern era of rapid development and expansion, banking shows immense potential to expand and grow, thereby aiming to cater a greater customer clientele and making itself an inevitable option to choose for the well-being of the economy of the country. Pakistan is the sixth most populous country, fourth in Asia and second in SAARC countries; with a population of more than 170 million, consumer banking industry in Pakistan is growing exponentially. Over the last decade, Pakistan banking industry witnessed a phenomenal growth, especially in the past 5 years. Various products are offered in the Pakistan consumer banking industry; current accounts, debit cards, business finance etc. are just a few of the several services provided to its customers. Banking Industry in Pakistan comprises 26 companies, widespread over a network of more than 9000 branches, spreading all over Pakistan, connecting all cities and areas of the country under a

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single hub. An approx. 131760 people (Total Employment: 2007-2008) are employed in banking industry, creating opportunities for its current and potential customers. Every industry is pioneered by major players. In case of banking, there are 3 major players: Habib Bank Limited (HBL), United Bank Limited (UBL) and National Bank of Pakistan (NBP). HBL was established on August 25, 1941; even before the inception of an independent, consolidated state we call Pakistan today. It has the largest domestic branch network with over 1400 branches and 55 branches worldwide. Its domestic market share is over 40%, making HBL the Godfather of the Pakistani Banking Industry. It aims and continue to dictate the commercial banking sector with a major market share of inward foreign remittances (55%) and loans to small industries, traders and farmers. In second place we have NBP, which was established under the National Bank of Pakistan Ordinance, 1949. NBP acts as an agent where the State Bank of Pakistan (SBP) didn t have its own branch. NBP headquarters in Karachi, with over 1200 branches countrywide, providing services to both the commercial and public sector. Our final player is UBL, established on November 7, 1959. With the use of advance technology, UBL has focused positively on appropriate market segments and projects that it will facilitate rapid and sustainable growth. UBL has employed over 15000 employees, intending prompt attention to customer needs and always keen and eager to fulfill their social responsibilities.

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Industry Outline and SizeConsumer BankingConsumer banking is also known as retail banking . It can be defined as banking in which the banking institutions execute transactions directly with consumers, rather than corporations or other banks. These banks offer services such as saving and checking accounts, consumer loans, credit cards and other such services to individuals.

Figure 1: Classification of Banking Industry

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Consumer Banking Industry WorldwideConsumer banking helps to increase the economic growth. Consumer banking has provided the means of comfortable and effective environment to the consumer. The consumer banking industry has become increasingly competitive due to the changing needs of the consumer they serve. Banking system has been instrumental in the development of World Economy. When banks offer loans & related products at a lower interest rate, it enhances the growth prospects of the economy and vice-versa. But in the process of aiming higher targets and profits, many a times banks end up giving loans to the defaulters who not only turn bad but also let the bankers huge losses. During 2005-2007, lending all over the world grew rapidly mainly on account of hike in real estate prices, and banks even sanctioned loans to sub-standard borrowers. Interest rates charged were very high and ultimately the real estate bubble burst out. This created huge liquidity crunch and steep rise in the default rates. World's largest banks like Merrill Lynch, Lehman Brothers, etc. filed for bankruptcy. As a result, the world economy shook up. Banking industry witnessed series of shocks and people's trust on the banks was lost. Mergers and Acquisitions which once became a theory, converted into reality. Now, with restricted measures and effective control banking sector has emerged on the path of recovery.

Consumer Banking Industry of PakistanPakistan is the sixth most populous country of the world, fourth in Asia and second in SAARC countries, with a population of more than 170 million of which 100 million is less than of 25 year of age and with a 30 million of strong middle class the consumer banking industry of Pakistan is growing exponentially. Many in Pakistan benefits from consumer banking services but still there is an ample opportunity of growth. Over the last decade, Pakistan witnessed a phenomenal growth of consumer banking. This unprecedented development has followed privatization of nationalized banks, banking reforms brought about by the State Bank of Pakistan and an increasingly marketingoriented approach primarily aimed by banks at a large urban consumer base. It is not very well differentiated, as most banks offer both consumer and corporate banking services. Over the last 5 years Pakistan witnessed an extraordinary growth in consumer banking. Be they large or small bank, multinational or local, each one of them is geared towards making its mark in an already competitive environment that is the outcome of consumer banking. Multinational banks such as Barclays, Citibank and Standard Chartered have the support of the 17 | P a g e

knowledge base and funds of their foreign principals which makes them efficient in introducing new products, services and innovative technologies to their consumer base. Hot on the heels are the privatized banks, UBL, HBL and MCB which have embarked in consumer financing activities in not just big cities but smaller ones too, by virtue of their huge branch network. In doing so, they have generated huge volumes of business while at the same time driving down the prices of the products they offer. For instance, in 2002, HBL s consumer banking portfolio was worth less than a billion rupees. By the end of 2004, it is worth Rs. 17 billion. Similarly, since 2003 when it was privatized, UBL has launched many new products. And where the local banks such as Soneri, Askari and Union lack in technology, they make up by offering similar services at a much lower costs in our urban centers. While the foreign banks have played the pipers role when it comes to introducing new products, they have targeted the same segment which may be one of their limitations in this area. On the other hand, according to industry experts the real growth comes from local giants such as the UBL, HBL and MCB which have the necessary experience and knowledge of customizing products to specific local preferences.

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ProductsThere are different products offered by each of the different consumer banks in Pakistan. The products offered by each banks are in appendices 1 in . The products that are included in consumer banking are in appendices 2 in < Table 1: Product Descriptions>.

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Industry SizeNumber of Companies:1. Alfalah Bank of Pakistan 2. Allied Bank of Pakistan 3. Arif Habib Limited 4. Askari Bank 5. Atlas Bank 6. Bank Al-Habib 7. Barclays Bank 8. Faysal Bank 9. Habib Bank 10. Habib Metropolitan Bank 11. JS Bank 12. KASB Bank 13. MCB Bank Limited 14. Mybank Limited 15. NIB Bank 16. SAMBA Bank Limited 17. Silkbank Limited 18. Soneri Bank 19. United Bank Limited 20. Bank of Punjab 21. Citibank 22. Standard Chartered Bank Ltd 23. Royal Bank of Scotland Ltd 24. HSBC Ltd 25. First Women Bank Ltd 26. National Bank of Pakistan Ltd 20 | P a g e

Number of branches:

No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23

Banks The Bank of Punjab Allied Bank Ltd. Arif Habib Bank Ltd. Askari Bank Ltd. Atlas Bank Ltd. Bank Al-Falah Ltd. Bank Al-Habib Ltd. Faysal Bank Ltd. Habib Bank Ltd. Habib Metropolitan Bank Ltd. JS Bank Ltd. KASB Bank Ltd. MCB Bank Ltd. Mybank Ltd. NIB Bank Ltd. Soneri Bank Ltd. Standard Chartered Bank United Bank Ltd. Citibank HSBC Barclays Samba Bank National Bank

Branches 273 760 12 154 32 223 202 111 1,450 100 9 40 1, 025 69 241 92 178 1, 082 26 12 14 28 1, 245 21 | P a g e

24 25 26 Total

RBS First Woman Bank Ltd. Silkbank

79 38 Unavailable 9, 057

Table 2: Consumer Bank s Branches

Number of Units Produced:y y Citibank had issued over 125,000 VISA cards MCB card users are over 250,000

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Industry Dimension and StatisticsKeeping in view the diversity of the banking sector, being the sole provider of funds for sound banking, it covers a huge network of speedy and sticky branches, spreading all over Pakistan, connecting all cities and all areas of the country under a single hub. Thus, you may see the following distribution network city wise of all scheduled banks covering Pakistan s territory: BANKS Royal Bank of Scotland Allied Bank Habib Bank Limited Arif Habib Rupali Ltd. Askari Bank Atlas Bank Bank Alfalah Bank Al-Habib Faysal Bank First Woman Bank Ltd. Habib Metropolitan Bank JS Bank Ltd. MCB Bank Ltd. Silk Bank Ltd. Soneri Bank Ltd. MyBank Ltd. NBP NIB KARACHI 25 100 150 7 36 13 43 83 31 10 62 5 120 16 39 24 84 85 LAHORE 24 68 88 2 35 7 35 38 31 4 22 3 86 11 17 11 54 45 ISLAMABAD 3 29 19 1 5 11 9 5 6 2 2 1 17 4 2 3 22 14 PESHAWAR 3 25 24 11 5 5 4 5 2 1 18 2 2 3 20 8

Table 3: City Wise Distribution

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Number of New Branches Opened/ClosedWe have considered the timeframe from the year 2003-2008, along with data from the years 1948 to 1950 and then from 1978 to 2003. y In October 1948, with the inception of newly born Pakistan, there were 36 branches handling the operations. The number increased to 39 in the year 1949, however declined to 34 in the year 1950, due to the division of financial assets between the two sibling rivals. y By the end of 1958, there were a total of 26 banks comprising the Pakistani territory, out of which 7 were Pakistani banks, 10 were Indian banks and 9 were exchange banks, working with a web of 308 branches. y Moving down the line, two decades later, in the year 1978, there were 28 banks with 6,595 branches, out of which 9 were Pakistani banks with 6,552 branches and 19 were foreign banks, with a total of 42 branches. y In 1979, there were 30 banks, with a network of 6,470 branches, out of which 9 were Pakistani banks, operating with 6,689 branches, while the remaining 21 were foreign banks, spread over a network of 51 branches. y In 1980, the number remained constant with 30 banks, with a network of 6,816 branches, out of which 9 were Pakistani banks, operating with 6,760 branches, while the remaining 21 were foreign banks, spread over a network of 56 branches. y In the year 1981, there were 30 banks, with a network of 7,297 branches, out of which 9 were Pakistani banks, operating with 7,241 branches, while the remaining 21 were foreign banks, spread over a network of 56 branches. y In the year 1982, there were 32 banks, with a network of 7,306 branches, out of which 9 were Pakistani banks, operating with 7,248 branches, while the remaining 23 were foreign banks, spread over a network of 58 branches. y In the year 1983, there were 32 banks, with a network of 7,179 branches, out of which 9 were Pakistani banks, operating with 7,120 branches, while the remaining 23 were foreign banks, spread over a network of 59 branches. y In the year 1984, there were 32 banks, with a network of 7,056 branches, out of which 9 were Pakistani banks, operating with 6,997 branches, while the remaining 23 were foreign banks, spread over a network of 59 branches.

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y

In the year 1985, there were 32 banks, with a network of 7,017 branches, out of which 9 were Pakistani banks, operating with 6.958 branches, while the remaining 23 were foreign banks, spread over a network of 59 branches.

y

In the year 1986 there were 31 banks, with a network of 7,050 branches, out of which 9 were Pakistani banks, operating with 6,988 branches, while the remaining 22 were foreign banks, spread over a network of 62 branches.

y

In the year 1987, there were 34 banks, with a network of 7,126 branches, out of which 9 were Pakistani banks, operating with 7,061 branches, while the remaining 25 were foreign banks, spread over a network of 65 branches.

y

In the year 1988, there were 37 banks, with a network of 7,233 branches, out of which 9 were Pakistani banks, operating with 7,168 branches, while the remaining 28 were foreign banks, spread over a network of 65 branches.

y

In the year 1989, there were 35 banks, with a network of 7,288 branches, out of which 10 were Pakistani banks, operating with 7,222 branches, while the remaining 25 were foreign banks, spread over a network of 66 branches.

y

In the year 1990, there were 37 banks, with a network of 7,439 branches, out of which 10 were Pakistani banks, operating with 7,372 branches, while the remaining 27 were foreign banks, spread over a network of 67 branches.

y

In the year 1991, there were 45 banks, with a network of 6,882 branches, out of which 10 were Pakistani banks, operating with 7,477 branches, while the remaining 29 were foreign banks, spread over a network of 72 branches.

y

In the year 1992, there were 47 banks, with a network of 7,644 branches, out of which 20 were Pakistani banks, operating with 7,574 branches, while the remaining 27 were foreign banks, spread over a network of 70 branches.

y

In the year 1993, there were 47 banks, with a network of 7,721 branches, out of which 20 were Pakistani banks, operating with 7,648 branches, while the remaining 27 were foreign banks, spread over a network of 73 branches.

y

In the year 1994, there were 49 banks, with a network of 8,134 branches, out of which 23 were Pakistani banks, operating with 8,055 branches, while the remaining 26 were foreign banks, spread over a network of 79 branches.

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y

In the year 1995, there were 51 banks, with a network of 8,422 branches, out of which 25 were Pakistani banks, operating with 8,345 branches, while the remaining 26 were foreign banks, spread over a network of 77 branches.

y

In the year 1996, there were 52 banks, with a network of 8,532 branches, out of which 25 were Pakistani banks, operating with 8,450 branches, while the remaining 27 were foreign banks, spread over a network of 82 branches.

y

In the year 1997, there were 52 banks, with a network of 8,278 branches, out of which 25 were Pakistani banks, operating with 8,190 branches, while the remaining 27 were foreign banks, spread over a network of 88 branches.

y

In the year 1998, there were 52 banks, with a network of 7,960 branches, out of which 25 were Pakistani banks, operating with 7,867 branches, while the remaining 27 were foreign banks, spread over a network of 93 branches.

y

In the year 1999, there were 52 banks, with a network of 7,874 branches, out of which 25 were Pakistani banks, operating with 7,779 branches, while the remaining 27 were foreign banks, spread over a network of 95 branches.

y

In the year 2000, there were 49 banks, with a network of 7,828 branches, out of which 24 were Pakistani banks, operating with 7,741 branches, while the remaining 25 were foreign banks, spread over a network of 87 branches.

y

In the year 2001, there were 49 banks, with a network of 6,988 branches, out of which 24 were Pakistani banks, operating with 6,898 branches, while the remaining 25 were foreign banks, spread over a network of 90 branches.

y

In the year 2002, there were 46 banks, with a network of 6,949 branches, out of which 24 were Pakistani banks, operating with 6,869 branches, while the remaining 22 were foreign banks, spread over a network of 80 branches.

y

In the year 2003-04, there were 45 banks, with a network of 6,882 branches, out of which 28 were Pakistani banks, operating with 6,803 branches, while the remaining 17 were foreign banks, spread over a network of 79 branches.

y

In the year 2004-05, there were 45 banks, with a network of 7,105 branches, out of which 28 were Pakistani banks, operating with 7,014 branches, while the remaining 17 were foreign banks, spread over a network of 91 branches.

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y

In the year 2005-06, there were 45 banks, with a network of 7,421 branches, out of which 30 were Pakistani banks, operating with 7,296 branches, while the remaining 17 were foreign banks, spread over a network of 125 branches.

y

In the year 2006-07, there were 47 banks, with a network of 7,755 branches, out of which 34 were Pakistani banks, operating with 7,691 branches, while the remaining 13 were foreign banks, spread over a network of 64 branches.

y

In the year 2007-08, there were 45 banks, with a network of 8,343 branches, out of which 33 were Pakistani banks, operating with 8,274 branches, while the remaining 12 were foreign banks, spread over a network of 69 branches.

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Total EmploymentBANKS Allied Bank Alfalah Bank Askari Bank Atlas Bank Arif Habib Bank Bank Al-Habib Barclays Bank Citi Bank First Women Bank Faysal Bank HSBC Bank Habib Bank JS Bank KASB Bank MCB Bank Ltd. MyBank Ltd. NIB Bank NBP SAMBA Bank Ltd. Silkbank Ltd. Soneri Bank UBL CitiBank 445 10,235 1,014 249 13,272 334 634 882 8,881 611 500 9,983 1,031 403 13,745 495 704 937 9,287 636 611 524 722 126 18,800 636 507 899 123 18,625 3,154 513 1,530 138 16,228 18 815 12,638 978 786 15,176 709 981 1,257 13,479 3,154 4,077 531 2,069 321 14,488 458 1,206 14,930 969 1,632 15,356 1,224 1,426 1,430 15,502 4,077 3,529 535 2,475 788 14,572 755 1,320 17,120 824 5,580 16,429 1258 1,253 1,581 15,054 3,766 28 | P a g e 2003-04 6,859 2,147 1,723 55 29 1,253 2004-05 6,747 3,388 2,118 152 28 1,462 2005-06 8,273 6,289 4,533 247 24 2,182 2006-07 8,879 8,079 5,226 781 192 2,896 2007-08 10,279 9,183 6,808 1,025 319 2,764

Standard Chartered Bank Ltd. Royal Bank of Scotland TOTAL

631 272 70,309

728 322 73,456

8,120 1,970 103,192

9,245 3,042 118,036

10,120 5,093 132,430

Table 4: Total Employment for 5 years

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State of the Banking Industry of PakistanState of the Banking Industry of Pakistan in the year 1947In March 1947, there were 3496 offices of Indian schedule banks out of which as many as 487 were situated in territories presently constituting Pakistan. The partition plan was announced on 3rd June 1947 and 15th August 1947 was fixed as the date on which independence was to take effect. This left barely 2 months to divide the government machinery and the assets and liabilities of undivided India. Among others, an Expert committee was set up to deal with the problems of coinage, currency exchange, the division of the assets and the liabilities of the Reserve Bank of India, and the membership of the IMF and the World Bank. Since the Reserve Bank of India was the central Banking authority in India, it was decided, that in the interest of the smooth transition, it should continue to function in the new dominion of Pakistan until 30th September 1948. This decision, necessitated by the administrative and technical difficulties involved in immediately establishing and operation a central bank, was embodied in the Pakistan Monetary System and the Reserve Bank order of 1947.The order was stipulated that Pakistan would take over the management of the public debt and exchange control from the Reserve Bank of India on 1st April 1948 and the Indian notes would continue to be legal tender in Pakistan until 30th September 1948. The events immediately after independence seriously strained political relations between the two countries and a point was reached when it became evident that without control of its currency and banking, Pakistan would remain exposed grave dangers. Following the announcement of the independence plan in the June 1947, there was a rush on Banks to transfer funds and accounts. Consequently, Banking services in Pakistan were seriously impaired and drastically curtailed. The Banks which had their registered offices in Pakistan transferred them to India. In an effort to bring about the collapse of the new state by perusing a deliberate policy of withdrawal, the Indian Bank offices closed quickly. Those Banks which stayed operated only in name pending the winding up of their business. The number of scheduled Banks offices thus declined, from 487 before independence to only 195 by June 1948. Pakistan s banking system at that time consisted of 19 non-Indian foreign Banks, no higher in status than small branch offices whose policies and operations were controlled by their head offices. These banks which had their roots in the movement of export crops, had only a limited interest in the economic fortunes of the new state. The decline in the number of foreign banks between 1947 30 | P a g e

and 1973 is essentially because of the transfer and closure of banks of Indian origin. The number of branches of Banks of foreign origin also declined substantially from an estimated 206 in 1947 to only 28 in 1973. The only two Pakistani institutions were Habib Bank, which had transferred its office from Bombay to Karachi after the announcement of the independence plan, and the Australasia Bank, which had been functioning in the Pakistan territories prior to June 1947. As of 1st July 1948 NO. of Scheduled Banks No. of Bank Offices West Pakistan East Pakistan 2 Total

Pakistani Banks Indian Banks/ Foreign Banks Exchange Banks Total

2

23

25

29 7 38

45 16 84

106 3 111

151 19 195

Table 5: No. of Scheduled Banks as of July 1 st 1948

Nationalization and the Banking IndustryBackground (1947-74)The most important function of the Banking Institution is to provide credit. The manner in which the Banking Industry provides credit to a large measure determines the pace of economic development of any country. In the first 26 years, or so, the credit policy of the Banking Industry got fairly skewed and corrective actions were required to be taken. The government was fully aware of the distortions in the flow of bank credit and of the unhealthy practices that came to develop in the Banking Industry during the course of its rapid expansion throughout the fifties and sixties. Enquiries were conducted more than once to determine what may be rightly called the malfunctioning of the Banking Industry. One of the major enquiries that was instituted to examine in some detail the credit dispersal policy of the scheduled banks in Pakistan, which was almost entirely in the private sector, was the Credit Enquiry Commission which was setup in February, 1959. The Credit Commission of 1959 pointed 31 | P a g e

out that credit dispersal tended to move in the direction of the more substantial elements of the society who could provide better security for obtaining loans, both in terms of tangible items like a large deposit base, building or property, or often on the strength of business reputation, creditworthiness and goodwill. The 1959 Credit Commission was of the opinion that since the capacity of the relatively small borrowers to provide sufficient security was lacking, credit was not reaching those sectors of the economy which could rightly be called the primary producers. The Central Bank of the country, gave its full support in facilitating the work of the commission. In fact, it was the State Bank itself which provided the commission with the data which revealed that as of March 31, 1958, 63% of total bank credit was provided to only 222 loan accounts. The data provided by the State bank clearly revealed a significant concentration of Bank credit in a limited number of hands. The State Bank also deposed before the commission that credit to borrowers of small means as well as of small requirements was not being provided by the commercial banks of the country and, in a certain sense, lack of financial resources impeded the growth of the small agricultural, industrial as well as the commerce and trade sectors. In the forgoing discussion the distortion in credit dispersal and concentration of Banking, Industrial and Insurance interests in a limited number of family groups, coupled with the virtual denial of credit to the primary sectors of the economy, have been taken note of. In addition of the manifesto pledged by the then government the above causes provided the main justification for taking over the banking industry in the public sector in January 1974. It is thus noticed that despite the high growth rates achieved by the banking Industry in the various sub-sectors during 1947-73, certain malfunctioning, particularly in regard to credit dispersal were also sufficiently in evidence.

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Nationalization & Post nationalization Achievements (1974 - 86)The Banking Industry in Pakistan was nationalized on January 1st, 1974, through an ordinance issued by the President, and ratified later by the National Assembly, as the Nationalization Act of 1974. Under this act , all scheduled banks of Pakistan origin, details of which are given in the annexure, with their total assets and liabilities, were taken over by the Federal Government, while the rights of depositors were simultaneously guaranteed by the government. Banks of foreign origin, operating in Pakistan, were not nationalized. Prior to nationalization there were 8 commercial Banks with 28 branches of foreign origin; their share in total domestic deposits and advances was 6.88% and 8.09% respectively, of the total scheduled banks in Pakistan. Prior to nationalization, at the end of December 1973, there were 13 commercial banks of Pakistan origin, having 3000 branches which were ultimately merged to form 5 nationalized commercial banks.

NATIONALISED BANKS - AT A GLANCE Year ended 31st December Number of Banks Number of Branches Equity (Rs. In Million) Total Deposits Total Advances Total Assets Net Profits 1973 13 3000 510.0 21,836.2 12,746.2 37,119.3 202.9 1974 6 4463 579.9 1977 5 6653 915.7 1980 5 7192 1,315.0 84,557.2 51,290.5 1983 5 7012 4,459.9 159,661.9 90,971.1 1986 5 6786 7,386.7 218,048.3 133,703.6 321,760.1 1,544.9 Growth in 86 Over 73 About one-half Over 2 times Over 14 times About 10 times Over 10 times Over 8 times Over 7 times

26,023.0 52,906.1 18,988.0 32,925.8 18,064.9 79,878.4 369.7 615.9

125,783.3 225,334.3 668.5 1,274.6

Table 6: Position of banks after Nationalization

The growth of the nationalized commercial Banks during the 13 years, up to the end of 1986, compared to the situation as obtained at the end of December 1973, has been phenomenal by any standard.

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It is gratifying to note, that the quantitative gains achieved by the banking industry during 1974-86 have been accompanied by qualitative change, which has resulted in largely removing the shortcomings of the Banking Industry which characterized its pre nationalization era. The Pakistan Banking Council was setup in January 1st, 1974, to oversee the functioning of the nationalized commercial banks. The leadership and the guidance provided by the Pakistan Banking Council have gone a long way in bringing about qualitative changes in the nationalized commercial banking sector. After the nationalization of the banking industry, the most significant change that has occurred is in regard to its credit dispersal policy. The National Credit Consultative Council now sets credit targets on a yearly basis for the various sectors and sub-sectors of the economy, including mandatory credit targets to be provided as small loans. Bank credit now flows to the various competing sectors of the economy in line with the requirements at the macro-level, as determined by the government, through its yearly projection. Sectors previously denied bank credits, particularly the agricultural sector, now get adequate financial resources. The change that has taken place in credit dispersal can be seen from figures given below: COMMERCIAL BANKS CREDIT - PRIORITY SECTORS 1972-73 Agricultural of which small loans Industry of which small loans Commerce and trade of which small loans Housing of which small loans 413.8 57.0 5,377.7 263.0 3,886.6 156.0 178.1 74.0 1979-80 2,899.2 797.0 14,615.4 895.0 10,662.4 529.0 1,117.3 193.0 1986-87 7,825.8 5,994.0 45,522.9 1,741.0 27,002.1 363.0 1,200.2 -

Table 7: Commercial Banks Credit from 1972-1987

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The Banking council of Pakistan also encouraged the nationalized commercial Banks to open more branches in the rural sector. This policy was bearing fruits in terms of greater mobilization of financial resources available in the rural sector. Additionally, it is also helping the economy to become progressively more monetized. The nationalized commercial Banks were also the source of providing employment to a large number of people. The total number of staff employed by the nationalized commercial banks has more than doubled from 41,514 in 1973 to 85,008 in 1986.

Figure 2: No. of People Employed from 1973-1986

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Denationalization and the Banking IndustryFinancial Sector Reforms (1987 onwards)If years 1947 to 1973 can be termed as formative phase of Banking Industry in Pakistan, and period since 1974 as of its nationalization, then period after 1987 is that of financial sector reforms. Although actual reforms took place in 1990-91 onward, but pressure on the government to disinvest some of the nationalized banks and/or to allow establishment of banks in the private sector was there even before the year 1987. As stated earlier, during 1987-97, there was the change in the policy about ownership of the Banks. It was a shift from the policy from nationalization to that of privatization. Reasons for such changes were stated to be (a) mismanagement, (b) non existence of competition, (c) mounting high nonperforming loans of nationalized commercial banks. During this decade emphasis was to apply the free market economy mechanism in every sphere of national economy, be it banks or rising of funds for the government. Reforms in the financial sector were intended to reduce its segmentation, strengthen the capital base of the banks, and introduce competition in the sector to improve efficiency, reduce disintermediation and switch over to indirect and comparatively more efficient methods of conducting monetary policy. Above objectives were to be achieved through privatization of banks, allowing new commercial banks in the private sector, broadening of the financial market, improving public debt management, extension of state bank s of Pakistan Regulatory and Supervisory jurisdiction to non bank financial institutions, and development of an active secondary market for negotiable instruments.

Privatization of BanksDuring 1989-90, an amendment was made in the banks (Nationalization) Act 1974, which empowered the Federal government to sell all or any part of the share capital of nationalized commercial banks. In the wake of these amendments 26% of shares valuing 149.8 million of the Muslim Commercial Bank Ltd., held by the State bank of Pakistan were sold and the Bank s management was transferred to the purchasers of these 26% shares.

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During the year 1991-92, the Allied bank of Pakistan Ltd., was privatized by disinvesting 26% of its shares. In February 1992, 25% shares of Muslim Commercial Bank Ltd. were offered to the general public raising the private sector total shareholding in the Capital of Muslim Commercial Bank Ltd., to 51%.

New Pakistani Commercial banksThe First Women Bank Limited was established in the public sector during the year 1989-90. In order to provide the legal framework to enable the Federal government to pursue its policy of privatization, the Banks (Nationalization) Act 1974 was amended in 1991 empowering the government to permit the establishment of a bank in the private sector if it was satisfied that it would be in the public interest. For this purpose the government constituted a committee under chairman ship of Governor State Bank of Pakistan to scrutinize applications received from the private sector for setting up a new bank and make recommendations to the government on the basis of the eligibility criteria laid down. Based on the recommendations of the committee referred to above, permission for opening the following 10 new commercial banks in the private sector was given on 26th August 1991. y y y y y y y y y y Bank Commerce Al Habib Ltd. Soneri Bank Ltd. Union Bank Ltd. Mehran Bank Limited. Indus Bank Limited. Prime Commercial Bank Limited. Askari Commercial Bank Limited. Bolan Bank Limited. Capital Bank Limited. Republic Bank Limited.

All the Banks except Capital bank limited and Republic Bank Limited started functioning. During 1994-95, three new private sector Pakistani banks viz. Faysal Bank Limited, Platinum Commercial bank Limited and Prudential Commercial Bank Limited commences their business in Pakistan. In addition two provincial banks viz. The bank of Punjab and The Bank of Khyber were 37 | P a g e

declared as schedule Banks with effect from 19th September 1994. The year 1995 witnessed the formation of two private banks, which are Faysal Bank and Platinum Commercial Bank. Crescent Commercial bank was formed in 2004 whereas My Bank for formed in 2005.

State Bank of PakistanIn February 1994, the State Bank was given full autonomy, during the financial sector reforms. On January 21, 1997, this autonomy was further strengthened when the government issued three Amendment Ordinances (which were approved by the Parliament in May 1997). Those included were the State Bank of Pakistan Act, 1956, Banking Companies Ordinance, 1962 and Banks Nationalization Act, 1974. These changes gave full and exclusive authority to the State Bank to regulate the banking sector, to conduct an independent monetary policy and to set limit on government borrowings from the State Bank of Pakistan.

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Chronology1947 After Pakistan was born in 1947, Habib Bank, moved its headquarters to Karachi, Pakistan's first capital. Australasia Bank (now ABL) was the only fully functional Muslim Bank on Pakistan territory on August the 14th, 1947. 1948 State Bank of Pakistan commenced operation on July 1, 1948. Formation of Muslim Commercial Bank (MCB). 1949 National Bank of Pakistan (NBP) was established under the National Bank of Pakistan Ordinance 1949 and was government-owned. 1950 1951 1950 NBP established a branch in Jeddah, Saudi Arabia. Formation of Institute of Bankers Pakistan (IBP). HBL opened the first of 3 branches in Sri Lanka. 1952 1953 HBL established Habib Bank (Overseas). Pakistan Banks Association was constituted as a Private Limited Company on 31st March 1953. 1955 1956 By this time NBP had branches in London and Calcutta. State Bank of Pakistan Act 1956. HBL opened first of 5 branches in Kenya. 1957 HBL opened a branch in Aden. NBP established a branch in Baghdad, Iraq. 1959 Agha Hasan Abedi founded the UBL in 1959. Credit Enquiry Commission was setup in February, to examine in some detail the credit dispersal policy of the scheduled banks in Pakistan. 1961 Formation of Agricultural Development Bank of Pakistan (ADBP) now Zarai Taraqiati Bank Limited (ZTBL) Formation of Industrial Development Bank of Pakistan (IDBP). HBL opened the first of what would become 6 branches in the UK. 1962 Banking Companies Ordinance 1962. 39 | P a g e

NBP established a branch in Dar-es-Salaam,Tanzania. 1964 HBL opened the first of 4 branches in Mauritius and a branch in Beirut. The Iraqi government nationalized NBP's Baghdad branch. 1966 1967 1969 HBL opened the first of 8 branches in the UAE. The Tanzanian government nationalized the Dar-Es-Salaam branch. HBL opened first of 3 branches and an OBU in Bahrain. However, HB s branch in Aden is nationalized. 1971 1972 HBL opened an OBU in Singapore and a branch in New York. HBL opened the first of 11 branches in Oman. HBL constructed Habib Bank Plaza in Karachi to commemorate the bank s 25th Anniversary. 1973 1974 Introduction of Export Financing Scheme by SBP. Nationalization of SBP. The Pakistan Banking Council was setup in January 1st, 1974. Formation of Allied Bank Limited. The government of Pakistan nationalized HBL and HBL merged with Habib Bank (Overseas). The government of Pakistan nationalized NBP. As part of the concomitant consolidation of the banking sector, NBP acquired Bank of Bahawalpur. Government of Pakistan nationalized UBL. 1975 HBL opened a branch in Belgium. HBL also merged with Standard Bank, a Pakistani bank. 1976 HBL opened a branch in the Seychelles, the first of two branches in Bangladesh, and a branch in the Maldives. 1977 1979 1980 1981 NBP opened an offshore brain Cairo. HBL opened a branch in the Netherlands. HBL opened a branch in Paris and another in Hong Kong. HBL established Nigeria Habib Bank with 40% ownership. HBL also opened a representative office in Teheran. 40 | P a g e

1982 1983 1984

HBL opened a branch in Khartoum. HBL opened branch in the Karachi EPZ and a branch in Istanbul. HBL established Habib American Bank in New York with a branch each in Manhattan and Queens, and a US International Banking Facility. HBL also opened a branch in California.

1987 1989

HBL opened in Australia. The First Women Bank Limited was established in the public sector during the year 1989-90. The bank of Punjab was established in 1989

1991

Mehran Bank was incorporated. The Habib Group established a separate private bank, the Bank AL Habib, after private banking was re-established in Pakistan. HBL opened a branch in the Fiji Islands, and took over the Pakistani branches of failed bank, BCCI. In September, ABL was privatized. Bank AL Habib was incorporated as a public limited company and began banking operations as a new private bank in 1992. Askari Bank Ltd (formerly Askari Commercial Bank) was incorporated in Pakistan on October 9, 1991, as a Public Limited Company.

1992

Formation of Soneri Bank Limited. Formation of Askari Commercial Bank Limited. Formation of Bank Al-Falah Limited. Formation of Union Bank. In Nepal HBL acquired 20% of Himalayan Bank. Bank Alfalah was incorporated on June 21, 1992 as a public limited company under the Companies Ordinance 1984. Habib Metropolitan Bank was incorporated in Pakistan as a Public Listed Company in 1992 under the name, Metropolitan Bank Limited.

1993

Allied Bank Modaraba (FABM) was floated. The National Institute of Business and Finance (NIBAF) was set up on 8 March 41 | P a g e

1993 as a 'Private Limited Company by Guarantee' and was sponsored by the erstwhile Pakistan Banking Council (PBC) in collaboration with National Bank of Pakistan, Habib Bank Limited, United Bank Limited, Muslim Commercial Bank and Allied Bank Limited. 1994 Formation of KASB Bank Limited. Formation of Bank of Khyber. NBP amalgamated Mehran Bank. In February 1994, the State Bank was given full autonomy, during the financial sector reforms. The Bank of Punjab was given the status of retail bank. 1995 Faysal Bank was incorporated. Formation of Platinum Commercial Bank. HBL established a representative office in Cairo. 1997 NBP's branch in Ashgabat, Turkmenistan commenced operations. State Bank of Pakistan took over the assets and liabilities of PBC and purchased assets of NIBAF(National Institute of Business and Finance). Amendments in SBP Act 1956. Amendments in Banking Companies Ordinance 1962. Amendments in Banks Nationalization Act 1974. Full authority to SBP for regulating banking sector, conducting indecent monitory policy and setting limits on governments borrowings from SBP. 2000 HBL established Habib Canadian Bank. NBP opened a representative office in Almaty, Kazakhstan. Merger of Bank of America into Union Bank. 2001 Amalgamation of SBFC & RDFC into SME Bank. Merger of NDFC into NBP. Acquisition of Gulf Commercial Bank by PICIC as subsidary. Acquisition of Prudential Commercial Bank by Saudi Pak Commercial Bank. Formation of Pakistan International Bank with 45% shares with NBP and 55% 42 | P a g e

shares with UBL to work in UK as agreed between SBP and Bank of England. 2002 Formation of Meezan Bank Limited. Merger of Faysal Investment Bank into Faysal Bank. Merger of Societe Generale into Meezan Bank. Merger of Emirates International Bank into Union Bank. Acquisition of Platinum Commercial Bank by Khadin Ali Shah & Co. Merger of Standard Chartered Grindlays Bank into Standarad Chartered Bank. Pakistan's Privatization Commission announced that the Government of Pakistan had granted the Aga Khan Fund for Economic Development (AKFED), a subsidiary of the Aga Khan Development Network, rights to 51% of the shareholding in HBL, against an investment of PKR 22.409 billion (USD 389 million). The Government of Pakistan sold UBL in an open auction to a consortium of Abu Dhabi Group and Bestway Group. 2003 Merger of KASB(non-securities section) with KASB Bank(formerly Platinum Commercial Bank) Merger of Mashreqbank & Crescent Investment Bank into Mashreqbank Pakistan Limited Merger of NDLC and IFIC Bank with and into NDLC-IFIC Bank Merger of KASB Leasing with KASB Bank HBL received permission to open a branch in Afghanistan. 2003 NBP received permission to open a branch in Afghanistan. The NIB Bank Limited (formerly NDLC-IFIC Bank Limited) was incorporated in March 2003 as a publicly listed company. 2004 Formation of Crescent Commercial Bank Limted. On February 26, the Government of Pakistan handed over management control of Habib Bank to AKFED. The Board of Directors was reconstituted to have four AKFED nominees, including the Chairman and the President/CEO and three Government of Pakistan nominees. Merger of Ceylon-Pakistan Operations with and into Dawood Bank Limited 43 | P a g e

Acquisition of Bolan Bank by Iqbal Alimohammed Group Merger of Trust Inv. Bank Ltd., Fidelity Inv.Bank Ltd., and Doha Bank with and into Trust Com.Bank Ltd. Merger of Trust Commercial Bank with and into Crescent Commercial Bank Ltd. Merger of Credit Agricole Indosuez with NIB In August 2004 as a result of capital reconstruction, the Bank s ownership was transferred to a consortium comprising Ibrahim Leasing Limited and Ibrahim Group. 2005 Formation of My Bank Limited. Formation of Dubai Islamic Bank (Pakistan) Limited. Formation of Arif Habib Rupali Bank Limited. 2005 NBP closed its offshore branch in Cairo. In May 2005 Ibrahim Leasing Limited was amalgamated by transfer to and vested in with and into Allied Bank Limited. ILL shareholders were issued ABL shares in lieu of the ILL shares held by them. Merger of Ibrahim Leasing Limited with Allied Bank Ltd. Merger of Majority shares of Dawood Bank Limited by Atlas Group In 2005, Bank AL Habib began offering internet banking so accounts and records could be viewed online. My Bank was launched during June 2005 as a public limited company under the Companies Ordinance 1984 2006 HBL sold the operations that it had established in Fiji in 1991 to Bank of South Pacific. In 2006, Bank AL Habib became partners with MasterCard allowing them to issue credit cards for the first time. Merger of Atlas Investment bank with and into Atlas Bank Limited. Merger of Rupali bank with and into Arif Habib Rupali Bank Limited. Merger of First Allied Modaraba Limited with and into Allied Bank Limited. Acqusition of majority shares of Union Bank by Standard Chartered Bank (Pakistan) Limited. 44 | P a g e

Merger of Habib AG Zurich Pakistan operation with and into Habib Metropolitan Bank. Merger of American Express Bank and Jahangir Siddiqui Investment Bank Limited with and into JS Bank Limited. Merger of Standard Chartered Bank-Pakistan operations and Union Bank Limited with & into Standard Chartered Bank (Pakistan) Ltd. Merger of Investment Corporation of Pakistan with and into Industrial Development Bank of Pakistan Formation of JS Bank Limited 2007 Acquisition of majority shares of Crescent Commercial Bank Ltd. by SAMBA Financial Group Acquisition of Prime Commerical Bank by ABN Amro Bank and named as ABNAmro Bank (Pakistan) Ltd. Formation of Emirates Global Islamic Bank Limited. Formation of Dawood Islamic Bank Limited. 2008 In October, 2008, Atlas Bank was acquired by the KASB group. The new bank was named KASB-Atlas Bank. 2009 HBL was granted permission to open Remnibi accounts in China. It already has training and shareholding arrangements with Urumqi Commercial Bank.

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Major Player s Profiles30-Jun-08 Ranking 1 2 3 4 Bank Habib Bank National Bank United Bank MCB Bank branches 1,450 1,245 1,082 1,025 Deposits 597,090,545,000 624,939,016,000 483,560,062,000 330,274,155,000 31-Dec-08 Assets 757,928,389,000 817,758,326,000 605,072,482,000 443,615,904,000 EPS 115 180 80 240

Source: HBL Annual Report, NBP Annual Report, UBL Annual Report, MCB Annual Report 2008Table 8: Bank Rankings

Figure 3: Branch Percentages

Thus looking at the information given above, the three major players that we took are: Habib Bank Limited (HBL) National Bank of Pakistan (NBP) United Bank Limited (UBL)

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Habib Bank Limited (HBL)Habib bank was established on August 25th, 1941, even before Pakistan came into being on the map of the world.

Location of Head Offices and Principal Offices:HBL has the largest domestic branch network with over 1,400 branches. Its principal offices are: The Head Office is located as: Head Office Habib Bank Plaza I.I.Chundrigar Road Karachi-75650, Pakistan. Phone: 021-2418000 (50 lines) Fax: 021-9217511 The Registered Office is located as: Registered Office 4th Floor, Habib Bank Tower Jinnah Avenue Islamabad, Pakistan. Phone: 051-2872203 & 051-281183 Fax: 051-28722052

Impact on Pakistani Banking IndustryHabib Bank Limited is commonly referred to as "HBL" and head-quartered in Habib Bank Plaza, Karachi, Pakistan, it is the largest bank in Pakistan. The bank has a network of over 1450 branches in Pakistan and 55 branches worldwide. It has a domestic market share of over 40%. It continues to dominate the commercial banking sector with a major market share in inward foreign remittances (55%) and loans to small industries, traders and farmers.

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Services and Productsy y y y y y y y Car To Car Car Loan Credit Cards Deposit Accounts Bancassurance Debit Card Phone Banking Mutual Funds

Historical Highlights of HBLy y y y y y y y

1951 HBL opened the first of 3 branches in Sri Lanka. 1952 HBL established Habib Bank (Overseas). 1956 HBL opened first of 5 branches in Kenya. 1957 or 1958 HBL opened a branch in Aden. 1961 HBL opened the first of what would become 6 branches in the UK. 1964 HBL opened the first of 4 branches in Mauritius and a branch in Beirut. 1966 HBL opened the first of 8 branches in the UAE. 1969 HBL opened first of 3 branches and an OBU in Bahrain. HBL s branch in Aden is nationalized.

y y

1971 HBL opened an OBU in Singapore and a branch in New York. 1972 HBL opened the first of 11 branches in Oman. HBL constructed Habib Bank Plaza in Karachi to commemorate the bank s 25th Anniversary.

y

1974 The government of Pakistan nationalized HBL and HBL merged with Habib Bank (Overseas).

y

1975 HBL opened a branch in Belgium. HBL also merged with Standard Bank, a Pakistani bank.

y

1976 HBL opened a branch in the Seychelles, the first of two branches in Bangladesh, and a branch in the Maldives.

y

1979 HBL opened a branch in the Netherlands. 48 | P a g e

y y

1980 HBL opened a branch in Paris and in Hong Kong. 1981 HBL established Nigeria Habib Bank with 40% ownership. HBL also opened a representative office in Teheran.

y y y

1982 HBL opened a branch in Khartoum. 1983 HBL opened branch in the Karachi EPZ and a branch in Istanbul. 1984 HBL established Habib American Bank in New York with a branch each in Manhattan and Queens, and a US International Banking Facility. HBL also opened a branch in California.

y y

1987 HBL opened in Australia. 1991 The Habib Group established a separate private bank, the Bank AL Habib, after private banking was re-established in Pakistan. HBL opened a branch in the Fiji Islands, and took over the Paksistani branches of failed bank, BCCI.

y y y

1992 In Nepal HBL acquired 20% of Himalayan Bank. 1995 HBL established a representative office in Cairo. 1990s HBL established Habib Finance (Australia), and Habib Finance International Limited, Hong Kong.

y y

2000 HBL established Habib Canadian Bank. 2002 On June 13, 2002 Pakistan's Privatization Commission announced that the Government of Pakistan had granted the Aga Khan Fund for Economic Development (AKFED), a subsidiary of the Aga Khan Development Network, rights to 51% of the shareholding in HBL, against an investment of PKR 22.409 billion (USD 389 million).

y

HBL's UK operation came close to being shut down due to regulatory issues with the Financial Services Authority. The issue was resolved by converting the operations to a subsidiary. Then Habib Bank Limited and Allied Bank of Pakistan merged their operations (Habib contributed its 6 branches and Allied its 4), into a new bank, called Habib-Allied International Bank, in which Habib Bank has a 90.5 percent shareholding, while Allied Bank has 9.5 percent. Simultaneously with the transfer of business to the new bank, both Allied and Habib Bank close down all independent operations in the UK.

y y

2003 HBL received permission to open a branch in Afghanistan. 2004 On February 26, the Government of Pakistan handed over management control of Habib Bank to AKFED. The Board of Directors was reconstituted to have four AKFED

49 | P a g e

nominees, including the Chairman and the President/CEO and three Government of Pakistan nominees.y y

2006 HBL sold the operations that it had established in Fiji in 1991 to Bank of South Pacific. 2009 HBL was granted permission to open Remnibi accounts in China. It already has training and shareholding arrangements with Urumqi Commercial Bank

Source: Corporate Information of HBLFigure 4: Habib Bank Corporate Information

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National Bank of Pakistan (NBP)In the year 1949 National Bank of Pakistan (NBP) was established under the National Bank of Pakistan Ordinance 1949 and was government-owned. NBP acted as an agent of the central bank wherever the State Bank did not have its own branch. It also undertook government treasury operations. Its first branches were in jute growing areas in East Pakistan. Offices in Karachi and Lahore followed. NBP headquarters in Karachi, Pakistan with over 1,200 branches country wide. The bank provides both commercial and public sector banking services.

Services and Productsy y y y y y y y y y NBP Premier Amdani PLS Saving Account NBP Karobar (Mera apna karobar) NBP Saiban (Home Financing) Personal Loan ATM +Debit Card Financing Facility for Stock Investors Ready Cash against Gold Agriculture Farming Program Personal Accident Insurance

National Bank of Pakistan has got the second largest Banking Network in Pakistan with over 1200 branches in both rural and urban areas of Pakistan. Similarly, NBP s Assets and Deposits are the second largest in Pakistan. The Earning per share and the Dividends per share have been rising over the past few years, which shows the sign of progress. NBP s contribution in the development of small and medium size entrepreneurs is significant. It is credited with introducing such innovative schemes as People's Credit Scheme (1960), supervised agricultural credit programme (1972) and educational loans on compassionate grounds.

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Historical Highlights of NBPy 1949 National Bank of Pakistan (NBP) was established under the National Bank of Pakistan Ordinance 1949 and was government-owned. NBP acted as an agent of the central bank wherever the State Bank did not have its own branch. It also undertook government treasury operations. Its first branches were in jute growing areas in East Pakistan. Offices in Karachi and Lahore followed. y y y y y y 1950 NBP established a branch in Jeddah, Saudi Arabia. 1955 By this time NBP had branches in London and Calcutta. 1957 NBP established a branch in Baghdad, Iraq. 1962 NBP established a branch in Dar-es-Salaam, Tanganyika. 1964 The Iraqi government nationalized NBP's Baghdad branch. 1965 The Indian government seized the Calcutta branch on the outbreak of hostilities between India and Pakistan. y y 1967 The Tanzanian government nationalized the Dar-Es-Salaam branch. 1971 NBP acquired Bank of China's two branches, one in Karachi and one at Chittagong. At separation of East Pakistan NBP lost its branches there. NBP merged with Eastern Mercantile Bank and with Eastern Bank Corporation. y 1974 The government of Pakistan nationalized NBP. As part of the concomitant consolidation of the banking sector, NBP acquired Bank of Bahawalpur. y y y y y 1977 NBP opened an offshore brain Cairo. 1994 NBP amalgamated Mehran Bank. 1997 NBP's branch in Ashgabat, Turkmenistan commenced operations. 2000 NBP opened a representative office in Almaty, Kazakhstan. 2001 State Bank of Pakistan and Bank of England agree to allow only 2 Pakistani banks to operate in the UK. NBP and United Bank agreed to merge their operations to form Pakistan International Bank, of which NBP would own 45% and United Bank 55%. y 2002 Pakistan International Bank renamed itself United National Bank Limited (UNB). The ownership structure of the UNB remained as before. The only change to the shareholding structure is that UNB had recently been privatized in Pakistan and was now owned 49% by the Government of Pakistan and 51% by a joint foreign consortium of Abu Dhabi. 52 | P a g e

y y

2003 NBP received permission to open a branch in Afghanistan. 2005 NBP closed its offshore branch in Cairo.

Impact on Pakistani Banking IndustryNBP acts as an agent in absence of the State Bank of Pakistan and shows great zeal towards development of small and medium enterprises. NBP has the second largest banking network in Pakistan, with 1245 branches and 16.42 m employees. National Bank of Pakistan is the largest commercial bank operating in Pakistan. Its balance sheet size surpasses that of any of the other banks functioning locally. It has redefined its role and has moved from a public sector organization into a modern commercial bank. The Bank's services are available to individuals, corporate entities and government. While it continues to act as trustee of public funds and as the agent to the State Bank of Pakistan (in places where SBP does not have a presence) it has diversified its business portfolio and is today a major lead player in the debt equity market, corporate investment banking, retail and consumer banking, agricultural financing, treasury services and is showing growing interest in promoting and developing the country's small and medium enterprises and at the same time fulfilling its social responsibilities, NBP headquarters in Karachi, Pakistan with over 1,200 branches country wide. The bank provides both commercial and public sector banking services. It has assets worth USD 12.293 billion in 2007.

Source: Corporate Information of NBPFigure 5: NBP Corporate Information

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United Bank Limited (UBL)United Bank Limited was first established on November 07, 1959, with a total capital of Rs. 30 million. The quick growth of UBL was due to the fact that UBL was the first bank in Pakistan to introduce professional management, computers, economic and business research, latest managerial practices and customer orientation.

Main head office and registered office of United Bank Limited (UBL) are:Head Office State Life Insurance Corp. Building #1, I.I. Chundrigar Road, Karachi, Pakistan P.O. Box No.: 4306 Phone: (92-21) 111-825-111 Gram: "UNITED" Fax: (92-21) 2413492 Registered Office 13 Floor, UBL Building, Jinnah Avenue, Blue Area Islamabad, Pakistan

Products and ServicesEven if you are an individual or a small-medium-sized business, UBL has a lot to offer. UBL offers the largest product portfolio, as well as efficient personalized banking services to meet all of its customer s needs. UBL is driven by customer service, and it aims at managing elevated standards. Deposits and Commercial Products y y y y y y y y UBL Business Partner Current Account Rupee Transactional Account (RTA) Pls Saving Account UBL Profit Certificate of Deposit (COD) UBL Uniflex UBL Unisaver Foreign Currency Savings Foreign Currency Term Deposits Receipts Regular Term Deposits Receipts 54 | P a g e

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Special Notice Deposits Receipts UBL Basic Banking Account Additional Services & Information

Cards and Loans y y y y y y y y y U