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An interview with Amar Z. Khan, President, United Bank Limited

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 and Treasury.

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." he added.

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.