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Apr 09 - 15, 2001

Foreign banks show mixed performance

The performance of foreign banks indicated a mixed trend during 2000, in a period marked by cautious lending, focus on retail banking and local currency deposit mobilization.

Of the 15 foreign banks including one incorporated in Pakistan with major Arab stakes, whose balancesheets have been made public, four posted losses and 11 recorded after-tax profits. In 1999, the comparable number of loss-making foreign banks was five.

The non-performing loans (NPL) of these 15 banks amounted to Rs5.4 billion at the closing of 2000. The major amounts of NPL were shared by Faysal (Rs1,472 million), Citibank (Rs1,006 million) Standard Chartered Grindlays (Rs810 million) and Standard Chartered (Rs485 million).

Three banks, ABN-AMRO, Habib Bank AG Zurich and IFIC, improved their after-tax profits and an equal number succeeded in converting losses of 1999 into profits in the year under review. These are Citibank, Faysal Bank and American Express. Faysal is incorporated in Pakistan with major foreign stakes.

The profits of five leading European and Arab banks plummeted in 2000 when compared to 1999. These were: Standard Chartered, Standard Chartered Grindlays, Credit Agricole Indo-Suez, Mashreq and Emirates. Deutsche and Hongkong Shanghai went into red. In 1999, they made profits. Bank of Oman reported losses for the second year whereas Societe Generale was able to reduce its losses.

With the closing down of the operations of the Bank of America and Trust Bank, foreign bank branches were reduced by seven. Since foreign banks cater to first-tier borrowers, multinationals and reputable domestic corporates, their branch network is not of much importance for lending purposes. A large branch network, however, helps attract deposits which increases liquidity for funding corporate sector. Nationalized commercial banks have been able to attract multinationals, because of much bigger resources mobilized through large branch network.

Yield on T-bills lowered

The State Bank on Tuesday sucked in Rs18.5 billion excess liquidity from a highly liquid inter-bank money market through the sale of treasury bills of a face value of Rs19.45 billion.

In doing so, it kept weighted average yield on one-year T bills unchanged at the previous level, though it slightly slashed the yield on three-month and six-month bills. Bankers said they saw it as a signal that the monetary policy may remain tight in the medium term. But, a temporary ease-off could not be ruled out, they said.

The SBP said it sold Rs12.8 billion through sale of three-month bills at a weighted average of 11.08 per cent. It said it also sold Rs1.6 billion six-month T bills and Rs5.05 billion one- year bills at 11.53 and 11.95 per cent. Whereas weighted average yield on one-year bills shows no change over the previous cutoff. The yield on three-month and six-month bills are slightly lower than their mid-March cut-offs at 11.27 and 11.60 per cent respectively.

Rupee falls further

The rupee lost 25 paisa more to a US dollar in inter-bank market on Tuesday to close at 61.50/61.55 for spot buying and selling against the previous close of 61.25/61.30. But bankers said the rupee hit a new low of 61.65 to a dollar earlier in the day due to heavy debt payments by public sector agencies and private companies.

On Monday the rupee had hit an intra-day low of 61.40 to a US dollar.

In the open currency market the rupee lost 10 paisa to close at 64.10/64.15 to a dollar against the previous close of 64.00/ 64.05 for spot buying and selling.

SBP borrows $215m

The State Bank borrowed about $215 million from banks last month through more than one-year swap for rupee. That is the banks lent dollars to SBP for one year and in return got the rupee equivalent of the amount they had lent: in some cases banks even got treasury bills from SBP instead of rupees.

Senior bankers said the $215 million swap helped SBP meet two key quarter-end IMF targets without creating a liquidity crisis in inter-bank market.

$1.046bn held by banks

Pakistan's liquid foreign exchange reserves stood at $2.106 billion on April 2, according to a press release issued by the State Bank.

The reserves included $1.060 billion held by the State Bank and $1.046 billion held by banks. "This level of reserves is higher than reported earlier because the foreign currency deposits held by the banks outside SBP were not disclosed before," says the release.

Shaukat calls for IMF waivers

Pakistan has requested the International Monetary Fund (IMF) to give four waivers on revenue generation and other such issues in order to complete the first review under the Stand-By Arrangement approved by the Fund's Executive Board.

In a letter to the IMF, Finance Minister Shaukat Aziz said that a waiver be given on the performance criterion on the revenue of the Central Board of Revenue (CBR) at end-December 2000, a waiver of the structural performance criterion related to petroleum price adjustment on December 15, 2000, and modifications of the performance criteria on the CBR revenue and the net domestic assets (NDA) of the State Bank of Pakistan (SBP) for end-March 2001.

WB offers $100m for drought victims

The World Bank will provide $100 million emergency assistance to Pakistan to mitigate the effects of drought in the country.

Senior Vice-President and Chief Economist of the World Bank, Nicholas Stern, who called on Chief Executive Gen Pervez Musharraf on Saturday, assured him that the World Bank would offer $100 million to help remove the sufferings of the people that came in the wake of prolonged drought situation.

Informed sources said that the chief executive was told that the amount of emergency assistance for drought could be more than $100 million as various details were still being worked out.