EFFORTS TO MAKE UBL A BANKABLE
An interview with Amar Z.
Khan, President, United Bank Limited
By SHABBIR H. KAZMI
Jun 26 - Jul 02, 2000
United Bank Limited (UBL) was the first commercial bank in the country
to announce its audited results for the year l999 in February this year. The Bank was able
to come out with the audited results within a few weeks after the year end. This was
possible only due to successful implementation of a comprehensive MIS and financial
reporting system despite having a network of 1416 branches in Pakistan and overseas
operations in seven countries.
Amar Z. Khan, President of the Bank said, "UBL was able to post an
operating profit of Rs 1.4 billion for the year ending December 31,1999 as against Rs 133
million operating profit for the previous year reflecting a ten-fold growth. This
was the result of restructuring efforts initiated in the past. However, this could not be
achieved without the untiring effort of all the employees."
Talking about the facets of new strategy, Khan said, "UBL plans to
designate a hundred out of its 1398 branches as hub of banking operations each of
them providing centralized banking services on behalf of smaller branches or spokes. This
system will be soon operational. These hubs will be located throughout Pakistan. The
number of hubs in a city may vary depending on the number of branches located nearby. Hub
will act as centralized fully automated branches whereas spokes will serve as sales and
service points. The management wishes to reduce duplication of work and wants them to do
the job of active selling of its various financial products. This is the part of the
strategy to reduce cost of deposit. In order to encourage staff to play a more active
role, the management is also considering to pay commission on meeting the targets assigned
to them. At the same time depositors having more than Rs 20,000 average balance will be
treated as preferred customers."
At the end of 1999, UBL's net revenues from funds (NRFF) increased to
Rs 2.8 billion registering growth of 62 per cent over the previous year. The
intermediation cost ratio improved to 3.5 per cent as against 3.7 for the previous year.
Overall increase in deposits was by 8.9 per cent despite the discontinuation of prize
schemes at the end of the year. The advances increased by 92 per cent which included a
substantial increase in its market share of seasonal cotton ginning and rice financing.
All overseas locations reported profits in 1999. In addition to that
domestic operations posted a handsome contribution to the results particularly made
possible by the concerted efforts during the recovery campaign in the third quarter of
1999. This was complimented by the strong performance of the Corporate Banking Division
Commenting on the successful launch of a number of products, Khan
stated that the Bank's product development efforts were timely and professional. While the
aim was resource mobilization the effort was to improve quality of services.
According to Khan, during 1999 an overall progress was achieved. This
included an increase in NRFF to Rs 2.5 billion driven both by an increase in earning
assets and spreads, a growth of 13 per cent in fees, and commissions despite an overall
contraction in the country's international trade volumes. Domestic deposits increased by
8.9 per cent to Rs. 100 billion increasing UBL's market share in the total deposits of the
banking sector. On the assets side most of the growth was from corporate customers where
advances increased to Rs 25 billion. This has been managed in a controlled and
professional way with an emphasis on bringing in quality customers and entirely acceptable
risk. UBL is now recognized as a competent and effective arranger of syndicated financing.
Despite an adverse economic environment, there was a significant
reduction in the non-performing loans. Total recoveries and restructuring of
non-performing loans during the year amounted to Rs 7.7 billion, which includes Rs 3.6
billion in cash recoveries. Net of provisions, the Bank's non-performing loans decreased
to 19 per cent from 29 per cent in the previous year.
Khan was of the view that the business prospects for banking sector
seems promising mainly due to BMR being undertaken by various sectors which include,
energy, engineering and textile value addition. "At the same time I have a feeling
that non-performing loans, restructured in the recent past, may face some problems."
Commenting on the forecast for the banking sector as well as UBL, Khan
said, "Prospects for the sector depend a lot of the performance of the economy.
However, to ensure better results we are attaining the capabilities to enter internet
banking era. Many banks are in the process of finalizing the SWITCH arrangements for ATMs.
The boom for credit cards seems to be over. While the number of cards
issued has increased the population of card holders is more or less stagnant. The reason
for this stagnation was huge losses incurred by the banks. As a revised strategy, now many
banks are considering introduction of charge cards. It suits the banks as well as the
outlets. Whether one talks about ATMs or charge cards these will help in building deposits
base of banks as well as reducing cash carried by people.
Khan was of the view that job-specification and man-specification were
changing fast in the banking sector. "I will suggest to the existing and future
employees, in the banking sector, to learn new skills to meet the peculiar
requirements", he added.