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Performance of banking sector.

The depth of Pakistan's financial market was reflected in the outstanding performance of the foreign banks which earned a profit of over Rs. 4.1 billion and paid Rs. 2.7 billion Income Tax and over Rs. 416 million as Central Excise Duty to the Government exchequer in their fiscal year 1992. Pakistan's private banks seem to have made deeper inroads in the saving habits of people as the promising working results published by half for them for last year allayed fears about their commercial viability in a tight liquidity market and a low savings rate.

FOREIGN BANKS

The depth of Pakistan's financial market was reflected in the outstanding performance of the foreign banks which earned a profit of over Rs. 4.1 billion and paid Rs. 2.7 billion Income Tax and over Rs. 416 million as Central Excise Duty to the Government exchequer in their fiscal year 1992.

According to the details of the profits earned by various foreign banks in the fiscal year 1992, the ABM AMRO share was Rs. 236.852 million, AMEX Rs. 544.475 million, ANZ Rs. 534.227 million, BOA Rs. 539.838 million, Bank of Oman Rs. 129.295 million, BOT Rs. 61.552 million, Chase Rs. 75.218 million, Citibank Rs. 720.769 million, Deutsche, Rs. 129.192 million, Doha Rs. 87.72 million, Faysal Rs. 35.374 million, Habib Ag Rs. 151.031 million, Hongkong Rs. 46.882 million; IFIC Rs. 14.70 million, Indosuez Rs. 253.770 million, PAN Rs. 2.614 million, Rupali Rs. 22.710 million, Societe Generale Rs. 3.949 million and S. Chartered Rs. 606.146 million.

LOCAL BANKS

Pakistan's private banks seem to have made deeper inroads in the saving habits of people as the promising working results published by half of them for last year allayed fears about their commercial viability in a tight liquidity market and a low savings rate. Most of them have completed the first year of their operations successfully, showing profits and in some cases good payouts too. Many financial analysts felt that years to come could be much better if the current pace of growth was maintained. What seem to have impressed them are economics of scale at all levels and an efficient management of the financial affairs. "If the maiden year is any yardstick to the future, they have snatched away their due share with skill and professional efficiency, "says a leading financial analyst. But most of them have transferred big amounts to reserve fund or special reserve funds, a tendency might be good or bad at the same time for a new bank, he added.

In some cases they did not share profits with the share holders but made it a point to transfer certain amounts to the reserve funds. What is important for us is to maintain a strong liquidity position at least for the initial few years as a cushion against high borrowing costs and other allied compulsion of the situation, another banker said and added it was also necessary to meet the central bank's requirements.

Some two years ago Pakistan government allowed the private sector to set up commercial and investment banks and soon after more than a dozen banks were established. Pakistan had five banks in the public sector, out of which two Muslim Commercial Bank (MCB) and Allied Bank (ABL), have been sold to the private sector.

Most of the new banks were owned by powerful industrial groups including Saigols, Habibs, Dawoods and Nishat groups, some of them have stake in more than one bank. Banking sources said through some of the banks catered to the needs of their group business, they are as open to others as to their own group.

Their accounts show a good bit of diversity and it could be one of the reasons for their success. Their credibility could be the major factor though investor might take some more time to opt for prompt and efficient services, they added. But one thing is dear that they have come to stay and will stay with due pride of a good banking system, they maintained.

METROPOLITAN BANK

Metropolitan Bank was incorporated on August 3, 1992. Full banking operations commenced from October 21, same year. The banks first branch was opened in Karachi followed by four other branches in Lahore, Peshawar, Quetta and Mirpur (Azad Kashmir).

The profit and loss accounts and balance sheet for the period ending December 31, 1992 covering a period of two and half months i.e. starting business from October 21, 1992, reveal that bank earned Rs. 11.67 million profit and after making provision of Rs. 6.7 million taxes it earned a net profit of Rs. 4.95 million available for appropriation. Out of this a sum of Rs. 0.99 million were transferred to general reserves and Rs. 1.17 million towards special reserves.

The authorised capital of the company is quite impressive at Rs. 600 million and Rs. 300 million is the issued and paid-up capital. The bank during this period received Rs. 1027 million from deposits and other accounts. The fixed deposits were Rs. 810 million comprising about 80% of the total deposits receipts followed by current accounts Rs. 167 million and saving deposits Rs. 9 million. The Bank's deposit base as shown is the testimony of its credibility which the account holders retain in the bank's affairs and its people.

BANK OF PUNJAB

The Bank of Punjab (BOP) has earned a pretax profit of Rs. 357 million during the year-ended December 31, 1992. The bank has extended its branch network throughout Punjab in such a way that its 155 branches now provide personalised banking services in almost all districts and tehsils in the Punjab. The financial position of the BOP, is sound as it has been able to make a total pretax profit of over Rs. 625 million in the three years period. The bank's deposits on December 31, 1992 stood at Rs. 6,089 million as against Rs. 3,839 million at the end of 1991, showing a rise of 159 per cent over the previous year. Advances upto December 31, 1992, reached Rs. 3,170 million as against Rs. 1,908 million in 1991. In its leading policies, the bank has voluntarily adopted the prudential regulations of the State Bank of Pakistan and has informed it of the decision.

The operational result of the bank during the year 1992 have been highly satisfactory. The pretax profit of the bank for the year ended December 31, 1992, after making a provision of Rs. 104 million towards benevolent fund stood at Rs. 356.647 million showing an increase of 175 per cent over the previous year's profit of Rs. 204.034 million. The profit after tax amounted to Rs. 313.647 million showing an increase of 216 per cent over the previous year's figure.

BOP Chairman Mr. Tajammul Hussain said that the Board of Directors has recommended the payment of 75 per cent of the paid-up capital amounting to Rs. 155.25 million to shareholders as dividend in the shape of bonus shares. It has also been recommended that Rs. 124.75 million may be transferred to the reserve account. The total assets of the bank have increased to Rs. 8,594 million registering a rise of 184 per cent over the previous year's figure of Rs. 4,673 million.

BOLAN BANK

Bolan Bank announced a profit of Rs. 12.50 million for the year 1992. The bank passed over the dividend. However a reasonable share of income was transferred to the Reserve Fund. The Chairman of the bank Javed Yunus and all the share-holders expressed the hope that the bank due to its present policies should emerge as a larger bank in the future. An increase in income was also foreseen which would benefit all the shareholders.

SONERI BANK

Even with the conservative banking strategy, the Soneri Bank Limited (SBL), during a short span of just 8 months of its operation, earned a pretax profit of Rs. 77.237 million. Deposits of the bank grew rapidly to a figure of Rs. 1,687 million, which included foreign currency deposits totalling Rs. 971 million, i.e. 57.5 percent of the total deposits. Total advances of the bank, as on December 31, 1992 were Rs. 932 million including Rs. 291 million export refinance. Hence, total advances are hardly 55 per cent of the deposits.

The bank plans to open 5 new branches during 1993, due to rapidly expanding business and clientele, space available at Karachi and Lahore branches is proving inadequate. Options to solve this problem are also under active consideration. The bank has made pretax profit of Rs. 77.237 million but high rate of taxes on commercial banks, i.e. up to 64 per cent against maximum corporate tax rate of 44 per cent, leaves very meagre amount for shareholders for distribution or for increase in equity. The bank has an authorised capital at Rs. 600 million, has a reserve fund and has retained earnings of Rs. 31.642 million whereas its net assets valued at Rs. 1067.255 million on December 31, 1992.

ASKARI BANK

The operating profit before writing off of preliminary expenses was in excess of Rs. 32 million and the Board of Directors decided to write off start-up expenses incurred in first year. During the year, the Bank mobilized deposits in excess of Rs. 2.9 billion. The credit portfolio stood in excess of Rs. 850 million. The bank has recently opened three more branches at Islamabad, Faisalabad and Sialkot thus bringing the total to ten branches. The bank will shortly introduce merchant banking function and launch new and innovative services to stay ahead.

The following is the summary of working results (in rupees million) of some more banks.

FIDELITY BANK: Income 72.669, expenditure 56.761 pretax profit 15.907 return on equity 31.8 per cent, Rs. 1.86 right issue 50 per cent.

PRIME COMMERCIAL BANK: Income 122.250, expenditure 81.615 pretax profit 40,635 no dividend.

AL TOWFEEK COMMERCIAL BANK: Income 63.990, expenditure 35.091 pretax profit 28.899, dividend nil.

UNION BANK: Net profit 30.61, transfer to reserve fund 20.80 deposits 2.17 billion right issue 50 per cent.
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Title Annotation:Pakistan
Publication:Economic Review
Article Type:Industry Overview
Date:Mar 1, 1993
Words:1716
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