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Making public of 5 per cent shares of the National Bank recently proved a great success

By AMANULLAH BASHAR
 Mar 11 - 17, 2002

Saleem Altaf, Minister for Privatization has said that the government is determined to privatize its shares in the banking sector with a view to broaden the base of ownership, bring depth to the capital market and to make this sector more efficient through healthy competition.

Talking to PAGE, after an international meeting on investment, the minister said that making public of 5 per cent shares of the National Bank recently proved a great success besides indicating the market depth for privatization of more government shares in the banking sector.

He said that under the privatization programme, after enlistment of NBP shares, 5 per cent shares of HBL would soon be offered to the public through stock market followed by United Bank, Allied Bank, and Bank AlFalah shares this year. Although no time frame has been decided to make HBL shares public yet tentatively the process is likely to be completed by September this year.

According to financial experts, one of the desirable impacts of privatization of government shares in the banking sector may open its accounts for public proving a goading effect for better results. So far the accounts of the government owned banks were not open to public and whatever the results achieved in this sector were beyond the eyes of the critics. The privatization of banking sector would also enlarge the options for the investors as well as bring depth in the market through capitalization and ensure the transparency in results.

Meanwhile, the Cabinet Committee on Privatization has approved the listing an Initial Public Offering (IPO) of 5 per cent shares of the government in Habib Bank Limited (HBL). Keeping in view the response of the public to NBP shares, there are strong indications that HBL shares may prove a crowd-puller factor as far as applications for subscription are concerned.

In case of receiving more application, provision is already there for a further off-load of 5 per cent shares under "green shoe option".

The exercise is expected to strengthen the stock exchange, broaden the ownership base and provide benefit to small investors. Besides HBL shares, 9 per cent shares of the Muslim Commercial Bank will also be sold through Central Depository Company.

The National Bank issue was 5.5 times oversubscribed against an issue size of 5 per cent for Rs86.5 million, 27,546 applications had been received for 102 million shares amounting to Rs1.04 billion. Off loading of 5 per cent shares of the HBL will add to the capitalization of the market and that it was good to benefit the people of Pakistan.

The financial results for the year ended December 31, 2001 showed that HBL posted pre-tax profit of Rs2.2 billion reflecting 129 per cent growth over the net earnings of rupees one billion during the previous year.

Zakir Mehmood, President HBL in his recent briefing about financial results of the bank said that the bank's board had been able to unveil the results within eight weeks of the close of the year, inspite of having large network of 1,470 branches in Pakistan and overseas operations at 55 locations in 25 countries.

The bank had posted an impressive rise in profits after the additional provision of Rs2.6 billion against long standing non-performing loans, the provisions last year were Rs1.2 billion.

HBL was said to have pulled shutters on 250 branches during 2001 and retrenched around 3500 employees, the staff now on roll numbered 19,275 compared with 22,760 a year ago.

Zakir said that improved profitability was the blessing of "multi-faceted" restructuring in all sectors of its operations including retail banking, corporate and investment and treasury units.

Net revenue increased by 15 per cent or Rs2.2 billion to Rs16.8 billion for the year 2001. Customer deposits grew by Rs19.3 billion or 7.6 per cent to Rs273 billion and administrative expenses decreased to Rs11.9 billion from Rs12.2 billion the previous year.

Gross loans of the Bank stood about flat at Rs199 billion against Rs204 billion at end of 2000, the reduction representing cash recoveries of Rs3.5 billion on non-performing loans and repayment of Rs2.4 billion of subsidized staff loans. The Bank's non-performing loans now stood at Rs57 billion and through the policy of negotiations and persuasion sizable recovery had been made during 2001.

The profitability would be sustained through upgrading of technology including additional ATMs, improvement of branches and online banking. The bank would launch online banking in about four weeks time in major cities. The new products include car financing and "fast transfer" remittance schemes.

In August 2000 when the discount rates had risen from 10 to 14 per cent, the bank had not increased its lending rates so it was maintaining its rates now when the discount rate has been reduced. The HBL president said that dollar deposits at HBL stood $500 million, which included both the old frozen deposits and, those in new accounts.