Commercial Banking in Pakistan

Presenters:

Muhammad Zeeshan Azam

Fazeel Ahmed

Defining Banks in Terms of Assets

According to Pakistani Context, Banks have been divided into4 categories depends upon the assets:

1. Large Banks: total assets exceeding Rs 500 Bln

2. Medium Size Banks: total assets between Rs100 Bln –Rs500 Bln

3. Small Banks: Total Assets less than Rs100 Bln

4. Islamic Banks: Any bank possessing above assets (eithersmall, medium or large) using Islamic Operations

Number of Banks and BranchesLarge Banks Short Name

Number of Branches (2013)

Habib Bank Limited HBL 1546

National Bank of Pakistan

NBP 1342

United Bank Limited

UBL 1283

MCB Bank Limited MCB 1208

Allied Bank Limited ABL 948

Bank Alfalah Limited

BAF 423

Total 6750

Product B

• Feature 1

• Feature 2

• Feature 3

Medium Banks Short NameNumber of Branches (2013)

Bank Al-Habib BAH 320

Standard Chartered Bank SCB 116

Askari Bank Limited Askari 281

Bank of Punjab BOP 334

Faysal Bank Limited Faysal 269

Habib Metropolitan Bank HMB 174

Meezan Bank Limited Meezan 351

NIB Bank Limited NIB 179

Soneri Bank Limited Soneri 239

Summit Bank Summit !87

JS Bank Limted JS 211

Bank of Khayeber BOK 100

Small Banks Short Name Number of Branches (2013)

Sindh Bank Sindh 200

Silk bank Limited Silk 88

Citibank Citi 3

Bank Islami Pakistan Limited

Islami 201

Al-Baraka Bank Limited Albaraka 110

Dubai Islamic Bank Limited DIB 125

HSBC Bank HSBC 10

Barclays Bank Barclays 7

Burj Bank Burj 75

Samba Bank Limited SAMBA 28

Deutsche Bank Limited DB 3

Industrial & Commercial Bank of China

ICBC 2

Bank of Tokyo BOT 1

Large Banks Analysis

The Comparison of Banks at Different Levels

0

5000

10000

15000

20000

25000

30000

35000

40000

HBL NBP UBL MCB ABL BAF

Profit Before Taxation

PBT 2013 PBT 2012

Non Performing Loans

Large Banks:

• NBP has not improved its position. In 2012 NBP nonperforming loan ratio was 12.6% now in 2013 its ratio has increased to 16.3 %

• MCB has improve its ratio from 9.7% in 2012 to 8.7 % to 2013.

• BAF,ABL and UBL have improve their nonperforming loans to great extent.

• HBL has also shown great improvement in recovering non performing loan there non performing loan has decrease to 9.2 % in 2013 from 10.9% in 2012 .

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

HBL NBP UBL MCB ABL BAF

Total Assets of Banks

0.00% 20.00% 40.00% 60.00% 80.00% 100.00%

HBL

NBP

UBL

MCB

ABL

BAF

CASA Comparison2012 2013

Medium Banks Analysis

-10,000

-5,000

0

5,000

10,000

15,000

20,000

BAH SCB Askari Faysal BOP

Profit Before Taxation

PBT 2013 PBT 2012

-3,000

-2,000

-1,000

0

1,000

2,000

3,000

4,000

5,000

6,000

Profit before TaxationPBT 2013 PBT 2012

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

500,000

BAH SCB ASKARI FAYSAL BOP

Assets Comparison

Assets 2013 Assets 2012

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

HMB NIB SONERI SUMMIT JS BOK

Total Assets2013 2012

0.00% 20.00% 40.00% 60.00% 80.00% 100.00%

BAH

SCB

Askari

Faysal

BOP

HMB

CASA Comparison2012 2013

0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00%

HMB

NIB

Soneri

Summit

JS

BOK

CASA Comparison

2012 2013

Non Performing Loans

• SCB performed very well

• They reduced their non performing loans to 14.8% in 2013from 16.2 % in 2012 .

• Summit banks also reduce their non performing loans to28.6% in 2013 from 16.2 % in 2012.

• JS and BOK have also reduce their non performing loans, onthe other hand Askari bank and BOP do not perform wellin recovering loan their non performing loan has increaseas compare to last year.

Small Banks Analysis

-2,000

-1,500

-1,000

-500

0

500

1,000

1,500

2,000

2,500

3,000

3,500

Profit Before Taxation

PBT 2013 PBT 2012

-400

-200

0

200

400

600

Samba DB FWB BOT

Profit Before Taxation

2013 2012

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

Total assets Comparison

2013 2012

0

10,000

20,000

30,000

40,000

50,000

SAMBA DB FWB BOT

Total Asset Comparison2013 2012

0.00% 20.00% 40.00% 60.00% 80.00% 100.00%

Silk

Sindh

ICBC

CITI

Barclays

HSBC

CASA Comparison

2012 2013

0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00%

Samba

DB

FWB

BOT

CASA Comparison

2012 2013

Non Performing Loans• The non performing loan ratio is not very high if we

compare it with medium size and large size banks .

• There is great improvement as compared with previous year.

• Silk bank non performing loans in 2012 was 20.0% and in 2013 its nonperforming loans is 16 % .

• Al Baraka shown great improvement, their non performing ratio in 2012 is 19.3% and in 2013 is 13.2 %.

• Citi bank also improve its ratio it non performing loans in 2012 is 25.4% and in 2013 is 2.8% .

Islamic Banks Analysis

-3,000

-2,000

-1,000

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Meezan AlBaraka IslamicBanks

DIB Burj

Profit Before TaxationPBT 2013 PBT 2012

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000 Total Assets Comparison

2013 2012

0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00%

Meezan

AlBaraka

Islamic Banks

DIB

Burj

CASA Comparison

2012 2013

Changes occurred in Commercial Banks

• The banks that were losing money due to inefficiencies, waste andlimited product range have become highly profitable business.

• The quality of new assets has improved as tough measures are takento evaluate new loans

• Credit Information Bureau reports provide updated information tothe banks about the credit history and track record of the borrowers

• Banking Technology that was almost non-existent in Pakistan until afew years ago

• Average spread of large banks in 2013 was 5.5% as compared to 7% in 2012.

• Average spread of medium sized banks in 2013 was 4.3% as compared to 5.2% in 2012.

• Average spread of small banks in 2013 was 4.1% as compared to 5.5% in 2012.

• Average spread of Islamic banks in 2013 was 6.4% as compared to 7.6% in 2012.

Spread Rates EPS

Large Banks 2013 2012 2013 2012

HBL 4.7 6.3 17.2 17

NBP 6 7 2.5 7.3

UBL 5.3 6.7 15.8 15.7

MCB 6.3 8 21.6 20.6

ABL 5.4 7.2 14.3 11.4

BAF 5.2 6.2 3.5 3.4

Medium Banks

BAH 3.5 4.5 5.1 5.4

SCB 8.2 9.1 2.7 1.5

ASKARI 4.1 5.5 -6.2 1.5

BOP 2.2 1.6 1.8 1.4

FAYSAL 6.1 6.7 2.3 2.8HMB 4.1 4.9 4 3.5

Small Banks 2013 2012 2013 2012

Sindh 6.8 7.7 -0.4 -0.1

Silk 4.4 6.4 0.7 0.9

Citibank 4.6 7--- ---

HSBC 3.6 5--- ---

SAMBA 3.1 5.1--- ---

ICBC -1 5.8--- ---

Islamic Banks

Meezan 4 3.5 3.6 5.2

AlBaraka -0.1 -0.7 3.5 2.5

Islami 0.4 0.6 5.4 6.6

DIB 0.2 0.5 10.4 12.7

Burj -1.5 0.1 8.9 11.1

0

5

10

15

20

25

30

35

40

Large Banks Medium Banks Small Banks Islamic Banks

Loans & Advances Market Share

2013 2012

Concluding RemarksLARGE BANKS• HBL performed very well as compared to other banks .

• PBT has increased, non performing loans has reduced, CASA ratiohas improved

• MCB is also performed very well they increased their CASA ratio, Ithas highest CASA ratio in 2013. MCB has highest EPS in 2013.

• NBP performed very poor in 2013, their PBT is very low and their EPSis very low, their non performing loans has increased .

• UBL , ABL and BAF have good performances as compared them withtheir past year performance .

MEDIUM BANKS

• New entrants performed very well like NIB,BOK,HMB, and BAH

• SCB performed very well as compared, their CASA ratio is the highest in all the medium size banks. They reduced their operating cost and performed very well in CY2013.

• Askari bank , Summit bank , Soneri and JS bank had high operating cost

• Meezan bank performed very well in medium size banks

• They maintain their assets and has good EPS as compared it with other banks.

• ISLAMIC BANKS

• Islamic banks performed very well in CY 2013

• Their CASA ratio has improved, their non performing loans as reduced and their assets has increased .

• Islamic banking is the new concept in banking and people are showing great interest toward them.

• Meezan bank performed very well if we compare it with other islamic banks.

• Banking industry faces a high tax rate whichaffects its profitability and attractivenessfor new entrants.

• Within the banking system, governmentdischarged Rs.10.5 billion to SBP against aborrowing of Rs. 416.8 billion in the sameperiod last year.

Latest Updates• On 20th October 2014, State Bank of Pakistan gave the

confirmation report on Merging of HSBC Bank into MeezanBank ltd. Therefore, Meezan bank also possessed all thebranch all business of HSBC Pakistan will automatically turnbusiness of Meezan Bank.es that HSBC had before.

• Like HSBC, Europe-based Barclays Bank is also withdrawal a Pakistan marketplace for good.

• Recently, Habib Bank announced that it was negotiating with Barclays Bank for a merger of a Pakistan operations.