Topic to be Covered

• Origin of the word

• Different roles of Commercial Banks
• Challenges and issues of CB’S of today
• Commercial Banking in Pakistan
• Nationalization of Commercial banks
• Reasons for Nationalization
• Advantages and Disadvantages
• Aftereffects
 Topic to be Covered
• Privatization and Deregulation of Financial
Sector
• Commercial Banking Scenario in Pakistan
• Some of the Issues in Commercial Banks
• Key Commercial Banks
• Islamic banking
• Key Islamic banks
 Commercial Banks
• Commercial banks are Banks that provide
checking accounts, savings accounts, and
money market accounts and also accepts Time
Deposits

• Derived from the word BANCO

Challenges and Issues related to CB’s of
Today

• Highly competitive environment

• Cost of operation has increased

• Adaption of latest technology is an issue

• The sector is going through price war

Challenges and Issues related to CB’s of
Today
• Privatization and globalization has opened the
gates for new entrants

• More focus on CRM

 Commercial Banking in Pakistan
• At the time of partition only 487 banks were
located in Pakistan

• It was decided that Reserve Bank of India will

serve Pakistan till 1948

• There was a bad condition of this sector initially

• The number of scheduled banks decreased to 195

 Commercial Banking in Pakistan
• There were only two scheduled banks, owned
and operated by Muslims, these were
Australasia Bank and Habib Bank

• They accounted for 6% only

• State Bank came into existence on 1st July

1948
 Commercial Banking in Pakistan
• 1956 the economic activities went to new
height

• Ayub khan took over in 1958 and 256 banks

grew

• In 1970’s there was great pressure on banking

sector due to unstable political situation
 Commercial Banking in Pakistan
• The banking sector has shown tremendous
growth over the years.

• It is believed that Banking sector has largely

failed to utilize the country resources effectively.
• This system was not functioning well so
Nationalization of Commercial Banks was
favored.
 Nationalization
• 1974 there were 23 scheduled banks in
Pakistan

• The total number of branches of these banks

in Pakistan was 2942 out of which 2906
branches were opened by Pakistani Banks.

• All the banks had accumulated Rs. 15,800

million as deposits
 Nationalization
• All the banks were nationalized and merged
them into 5 Banks

• These included:
• National Bank of Pakistan, Habib Bank of
Pakistan Limited, United Bank Limited, Muslim
Commercial Bank and Allied Bank Limited
 Nationalization
• Concentration of Wealth of Few Hands

• Inappropriate Use of Credits

• Unbalanced Distribution of Credit

• Protection of Black Money

 Nationalization
• Exploitation of Bank employees

• Low efficiency of Foreign Bank branches

• Ineffective Monitory Policy of the State Bank

• Unhealthy Competition amongst Banks

 Advantages of Nationalization

• Non-development Expenditure was cut down by

the Banks 

• Better working of the Foreign bank Branches was

there.

• Fair Distribution of Wealth

• There was active control on Supply of Credit

 Advantages of Nationalization

• Development of Banking in the Country:

• Banking Facilities for Backward and Underdeveloped

Regions was provided

• Growth of the Level of Employment

• Development of the Agriculture Sector

• Proper Distribution of Loans

 After Effects of Nationalization
• After Nationalization it was expected that every
thing would be fine but it didn’t happened so.

• High Intermediations cost

• Poor Management/ with narrow product range

• Poor loan recovery from the customer

• Piling up of NPL’s
 Privatization
• Privatization implies reducing government
intervention in the economy by allowing more
and more private ownership of industry and
enterprise Reduction of politicized lending

• Improved regulation

• Proceeds from privatization to be used to retire

expensive debt.

• Ensuring the quality of services.

 Privatization

• Broaden and deepen the capital market.

• Lower transaction cost

• Strengthen Public Finances

 Privatization of MCB
• Privatized in 1991

• It has 1026 branches, 8 Islamic Branches and 300

ATM’s

• Customer base is of approximate 4 million

• Since privatization NPL’s have gone down

• Profit has increased

 Privatization of MCB
• Growth is based on quality of service and
technology that it is using

• It has largest ATM network

• Provides innovative products and services

• Fourth Pakistani company to be listed in London

stock exchange
 The Privatization Of ABL
• Formerly known as the Australasia Bank

• Privatized in 1991 when government disinvested

its 26% shares

• Further 25% of its shares were purchased by the

staff in 1993

• ESOP was introduced in 1994

 The Privatization Of ABL
• After privatization Bank did not show any
improvement

• There was jump in NPL’s

• Made huge losses between the financial year

2000 to 2002

• ROA had been negative

 The Privatization Of ABL
• In August 2004 capital Reconstruction of the
Bank was done

• Ownership was transferred to Ibrahim leasing Co.

in May 2005

• Bank has managed to increase its market share

• Presently the bank is expecting recoveries

 Privatization of UBL
• UBL was established in 1959

• In 1971 the Government of Pakistan Nationalized

it

• In 2002, the Government of Pakistan sold it in an

open auction to Abu Dhabi and Best Way group

• It has 1327 subsidiary branches

 Privatization of UBL
• 49 branches of UBL are in Lahore

• The ‘Largest International Bank award by the

CFA for 3 consecutive years (2003 to 2005)

• Abu Dhabi Group and Best way Group and

51% of shares
 Privatization of UBL
Present situation

• Profitability of UBL is up by 1%

• Non Interest Income up by 53

• Net Interest income is up by 9%

• ROA and ROE has also increased

• Deposits increased by 2%
 Privatization of Habib Bank Limited
• Established in Pakistan in 1947

• Largest private sector bank

• Customer base exceeded to five million

• It is the largest and oldest bank in Pakistan with a

network of 1425 branches and 55 branches
outside Pakistan
 Privatization of Habib Bank Limited

• HBL have a domestic market share of 40

• Before partition HBL played a vital role in

mobilizing the funds of the Muslim
community of India
 Agha Khan Fund for Economic
Development
• On June 13, 2002 Pakistan’s Privatization
Commission announced that the Government of
Pakistan had formally granted the Agha Khan
Fund for Economic Development (AKFED) rights
to 51% of the shareholding in HBL, against an
investment of PKR 22.409 billion

• After merger 90.5% were given to HBL and 9.5%

to Allied bank
 Agha Khan Fund for Economic
Development

• In 2008 its performance has improved.

• Advances increased by 8% and Deposits

increased by 10% over December 31, 2007
Commercial Banking Scenario in Pakistan
• Sector has been strong despite of pressures

• In near future Banking Sector will take a new shape

with mergers and acquisitions.

• The Commercial Banking sector strength will shrink

to 20-25

• Presently 80-85% shares of Pakistan’s banking sector

is in private hands
 Commercial Banking Scenario in
Pakistan
• Privatization has increased corporate earning

• The sector faced crisis in 2007 due to Law and

order situation with the tragic assassination of
Benazir Bhutto

• All Commercial Banks profit after tax declined

to Rs. 16.455 billion in first quarter 2009
 Some of the Issues in Commercial Banks

• Transformation of existing interest based

financial system into Riba free systems

• Enhancing paid up capital requirements.

• Ensuring recovery of restructured loans and

monitoring spreads
 Some key Commercial Banks
Bank Alfalah

• Fifth largest bank in Pakistan in terms of

assets

• Started its operations in Pakistan in 1997

 Some key Commercial Banks
Bank Alfalah

• It has 55 million credit card users

• Present authorized capital is 8 billion

• Deposits have grown to Rs. 287.7 billion

• The Advances have grown to 184.9 billion

 Some key Commercial Banks
Bank Alfalah

• Trade business has increased to Rs. 150 billion

• The bank sold 48.8 million of its holding in Warid

Telecom

• Due to this transaction the bank earned Rs. 1.7

billion
 Some key Commercial Banks
NIB Bank

• NIB Bank Ltd was incorporated in March 2003

• NIB Bank is proudly serving nearly half a million

customers

• It the 6th largest bank in Pakistan

• Paid-up capital 27.5 billion

 Some key Commercial Banks
NIB Bank
NIB business units include:
– Small Medium Enterprises and Commercial Banking
Group.

– Corporate and Investment Banking Group.

– Consumer and Small Enterprise Group.

– Treasury and Financial Institutions Group

 Some key Commercial Banks
Askari Bank

• Incorporated in Pakistan on October 9, 1991

• Listed at Karachi, Lahore and Islamabad stock

exchange

• Deposits base was Rs. 131.84 billion in 2006

 Some key Commercial Banks
Askari Bank

• Declared Best Retail Bank in Pakistan 2008

• 2008 PACRA gave A1+ rating for short term and

AA for long term

• Total equity of PKR 12.27 billion and total Assets

of PKR 182.17 billion
 Some key Commercial Banks
Askari Bank

• For quality services to valued customers the

bank has received several awards from
renowned National and International
organizations
 Some key Commercial Banks
National Bank of Pakistan

• Its Pakistan’s premier bank

• Determined to set higher standards

• Foster economic growth through aggressive and

balanced lending policies,
•
• Assets of over US $ 9.3 billion
 Some key Commercial Banks
Standard Chartered Bank

• Standard Chartered is listed on both the London Stock

Exchange and the Hong Kong Stock Exchange

• History of over 150 years

• Standard Chartered is well positioned in the emerging

trade corridors of Asia, Africa and the Middle East

• Derives over 90% of profits Asia, Africa and the Middle East
 Some key Commercial Banks
SILK Bank

• Formerly Saudi Pak Bank

• The Bank operates through 66 Branches

• Institutional sponsors from Nomwra, IFC and

bank MUSCAT
 Islamic Banking in Pakistan
• It refers to the banking system that operates
in context to Islamic rules

• Steps were taken in 1978 for setting the

Islamic Financial System

• Islamic system was fully applied on 1984

 Islamic Banking in Pakistan
In Islamic mode it can operate as:

• Financing by lending

• Financing through trade related

• Purchase of trade bills

• Leasing
 Islamic Banking in Pakistan
In Islamic mode it can operate as:

• Financing for development of property on the

basis of development charges

• Hire purchase

• Investment type of modes of financing

 Islamic Banking in Pakistan
• Islamic Banking is the growing fast.

• SBP has played a great role in development of

this sector

• These banks have 307 branches in Pakistan

• Meezan bank is largest Islamic Bank in Pakistan

Some key Islamic financial institutions
Dubai Islamic Bank

• World’s first full fledged Islamic bank

• It is undisputed leader in its field

• Close personal service and understanding forms the

basis of all its relationship

• The bank remains true to its roots as a customer-

centered organization
Some key Islamic financial institutions
Emirates Global Islamic Bank

• Started operations in February 2007

• It has 10 branches
• Sponsored by leading investors from the United
Arab Emirates and Saudi Arabia

• Dec 2008 posted loss after tax of Rs 260 million

Some key Islamic financial institutions
Bank Islami Pakistan Limited

• Operation in Pakistan since April 7th 2006

• It has 19 branches

• Sponsoring the First and largest asset

management company, ABAMCO Limited and the
first Islamic Fund in Pakistan.
Some key Islamic financial institutions
Meezan Bank

• First incorporated on January 27, 1997

• In 2002 it was given the status of full fledge

commercial bank

• Main shareholders Pak Kuwait investment

Company Islamic Development Bank of Jeddah’
and Shamil Bank of Bahrain
Some key Islamic financial institutions
Meezan Bank

• Administrative expenses increased with the

rate of 50%, this was mainly because of
opening of new branches thus increasing the
administrative expenditure.
Some key Commercial Banks