Commercial Banking in Pakistan

Presenters: Muhammad Zeeshan Azam Fazeel Ahmed

Defining Banks in Terms of Assets

According to Pakistani Context, Banks have been divided into 4 categories depends upon the assets:1. Large Banks: total assets exceeding Rs 500 Bln2. Medium Size Banks: total assets between Rs100 Bln –

Rs500 Bln3. Small Banks: Total Assets less than Rs100 Bln4. Islamic Banks: Any bank possessing above assets (either

small, medium or large) using Islamic Operations

Number of Banks and BranchesLarge Banks Short NameNumber 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

HBL NBP UBL MCB ABL BAF0

5000

10000

15000

20000

25000

30000

35000

40000

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 .

HBL NBP UBL MCB ABL BAF0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

Total Assets of Banks

HBL

NBP

UBL

MCB

ABL

BAF

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

CASA Comparison2012 2013

Medium Banks Analysis

BAH SCB Askari Faysal BOP

-10,000

-5,000

0

5,000

10,000

15,000

20,000

Profit Before Taxation

PBT 2013 PBT 2012

HMB NIB SoneriSummit JS BOK

-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

BAH SCB Askari Faysal BOP0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

500,000 Assets ComparisonAssets 2013 Assets 2012

HMB NIB Soneri Summit JS BOK0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

Total Assets2013 2012

BAH

SCB

Askari

Faysal

BOP

HMB

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

CASA Comparison2012 2013

HMB

NIB

Soneri

Summit

JS

BOK

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

CASA Comparison

2012 2013

Non Performing Loans• SCB performed very well • They reduced their non performing loans to 14.8% in 2013

from 16.2 % in 2012 . • Summit banks also reduce their non performing loans to

28.6% in 2013 from 16.2 % in 2012. • JS and BOK have also reduce their non performing loans, on

the other hand Askari bank and BOP do not perform well in recovering loan their non performing loan has increase as compare to last year.

Small Banks Analysis

Silk Sindh ICBC CITI Barclays HSBC

-2,000

-1,000

0

1,000

2,000

3,000

4,000

Profit Before Taxation

PBT 2013 PBT 2012

Samba DB FWB BOT

-300-200-100

0100200300400500600

Profit Before Taxation

2013 2012

Silk Sindh ICBC CITI Barclays HSBC0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

Total assets Comparison2013 2012

Samba DB FWB BOT0

5,00010,00015,00020,00025,00030,00035,00040,00045,000

Total Asset Comparison2013 2012

Silk

Sindh

ICBC

CITI

Barclays

HSBC

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

CASA Comparison

2012 2013

Samba

DB

FWB

BOT

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

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

Meezan AlBaraka Islamic Banks

DIB Burj

-3,000

-2,000

-1,000

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Profit Before TaxationPBT 2013 PBT 2012

Meeza

n

AlBaraka

Islamic

Banks DIBBurj

0

50000

100000

150000

200000

250000

300000

350000Total Assets Comparison

Meezan

AlBaraka

Islamic Banks

DIB

Burj

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

CASA Comparison2012 2013

Changes occurred in Commercial Banks

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

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

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

• Banking Technology that was almost non-existent in Pakistan until a few 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 EPSLarge Banks 2013 2012 2013 2012HBL 4.7 6.3 17.2 17NBP 6 7 2.5 7.3UBL 5.3 6.7 15.8 15.7MCB 6.3 8 21.6 20.6ABL 5.4 7.2 14.3 11.4BAF 5.2 6.2 3.5 3.4

Medium BanksBAH 3.5 4.5 5.1 5.4SCB 8.2 9.1 2.7 1.5ASKARI 4.1 5.5 -6.2 1.5BOP 2.2 1.6 1.8 1.4FAYSAL 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 -0.1Silk 4.4 6.4 0.7 0.9Citibank 4.6 7--- ---HSBC 3.6 5--- ---SAMBA 3.1 5.1--- ---ICBC -1 5.8--- ---Islamic BanksMeezan 4 3.5 3.6 5.2AlBaraka -0.1 -0.7 3.5 2.5Islami 0.4 0.6 5.4 6.6DIB 0.2 0.5 10.4 12.7Burj -1.5 0.1 8.9 11.1

Large Banks Medium Banks Small Banks Islamic Banks0

5

10

15

20

25

30

35

40

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 ratio

has improved • MCB is also performed very well they increased their CASA ratio, It

has highest CASA ratio in 2013. MCB has highest EPS in 2013.• NBP performed very poor in 2013, their PBT is very low and their

EPS is very low, their non performing loans has increased . • UBL , ABL and BAF have good performances as compared them with

their 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 which affects its profitability and attractiveness for new entrants.

• Within the banking system, government discharged Rs.10.5 billion to SBP against a borrowing of Rs. 416.8 billion in the same period last year.

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

confirmation report on Merging of HSBC Bank into Meezan Bank ltd. Therefore, Meezan bank also possessed all the branch all business of HSBC Pakistan will automatically turn business 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.