Bank has once again emerged as a leader
By SHABBIR H. KAZMI
August 9 - 15, 1999
The all around improvement in the performance of Habib Bank Limited
(HBL) is evident from the results of last year and supported by half yearly results for
1999. Continued growth in all areas has further strengthened HBL's position in the banking
sector of the country. This performance was the result of untiring efforts of the
employees and innovative leadership provided by the professional management.
According to Shaukat Tarin, the Chairman and President of HBL, the Bank
can now be rightly termed as a market leader in terms of developing new product and
enjoying nearly 20 per cent of total deposits and advances of the sector. The Bank is not
only a strong franchise in the domestic market but also a creditworthy institution
It may be recalled that in 1998 the Bank posted a pre-tax profit of Rs
1.2 billion as compared to a pre-tax loss of Rs 3.4 billion in 1997. For the first half of
current year it has posted pre-tax profit of Rs 815 million as compared to a profit of Rs
335 million in 1997 a growth of 143 per cent. This geometrical rise in profit was
possible by managing investments and advances prudently and cutting the cost.
The innovative product, Crorepati Deposit Certificate and other
financial products like Muhafiz (Rupee Travellers cheques) and concerted efforts to
mobilize deposits, along with improved efficiency, have helped in overall increase in
profit. During the six-month period of 1999 deposits grew to 12.6 per cent to Rs 253
billion from Rs 225 billion for the same period in the previous year. The remarkable
feature was that overseas deposits also grew in the same proportion.
The advances registered significant growth as a result of proactive
business solicitation, systematic approach for credit risk evaluation and credit extension
and active pursuance of loans. HBL now follows a risk evaluation and credit extension
policy which is comparable with any policies of any prudent international bank.
According to HBL President, the shift in bank's emphasis from deposit
mobilization to prudent use of available resources has helped in improving the spread and
cutting down provisioning. The change in central bank's policy regarding provisioning has
also helped in avoiding unnecessary provisions. He suggested that in order to improve
return to depositors and reducing lending rates the corporate tax structure for commercial
banks should be changed. At present banking companies are paying income tax @ 58 per cent
while the tax rate for other listed public limited companies is 45 per cent. If rate for
banks are brought at par with other companies it will help not only in further reducing
lending rates but will also improve return to depositors.
The government is committed to the privatization of HBL. The turnaround
of the Bank is a major step in this direction. A further support in this direction will be
a change in recovery laws to ensure speedy and smooth execution of decrees. Though, HBL
has been able to expeditiously recover the overdues, for the overall improvement of the
financial health of the sector, delays in execution of decrees and recovery of defaulted
loans should be minimized.
Shaukat also suggested that reforms initiated in nationalized banks
should not only be continued but further reinforced. The results themselves are the
biggest single display of the efforts. The employees of nationalized banks are as
dedicated as the employees of foreign or private commercial banks. But the indifferent
attitude of past managements and following the policy of 'no reward for efficiency' was a
source of frustration. This dilemma has now been overcome, to a large extent, in
nationalized commercial banks.
Following the policy of 'carrot and stick' may be a right solution in
some cases. But, there was no need for such a policy in HBL. Employees are willing to work
hard and they appreciate recognition of their honest work. At the same time they expect
that management would take care of them well, if they have genuine problems. As the new
management strictly follows merit policy, the role and influence of unions and officers
associations has been on the decline.