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  4. GREATER EMPHASIS ON CONSUMER BANKING PRODUCTS                                

"Best Bank in Pakistan" declared by 'Euromoney '

Jan 21 - 27, 2002

The world has entered into a new era so has banking. The customers want cost effective financial products, attractive return and excellent services but security of funds remains the top most concern. Even in Pakistan commercial banks are no longer confined to four-walls and the edge in technology plays a key role. Yet another important feature which cannot be overlooked by the management of any commercial bank is the extent of branch network, proximity to the customers, particularly for the rural population.

Muslim Commercial Bank (MCB) falls under the category of 'big five' domestic commercial banks. It was privatized in early nineties and since then has been going through major restructuring programme. Now it is well positioned to reap the benefit of a leaner operating base. The decline in provisioning requirements, revamped treasury and improved balance sheet strength have a positive impact on net profit after tax, which has registered persistent increase on year to year basis. It has not only benefited its customers but also helped the GoP in further divesting its share in the Bank.

MCB has been engaged in extensive management and operational restructuring to streamline its operations and to achieve cost efficiencies. A commendable feature is that unlike other public sector banks, which received assistance from Asian Development Bank to the tune of US$ 250 million, MCB carried out restructuring at its own initiative and without financial assistance from the government.

While complete restructuring of the bank's operations was a costly and lengthy process, MCB is now in a position to have greater control over administrative expenses. During this process more than 1,600 employees were released under a golden handshake scheme costing approximately two billion rupees and 110 branches were closed down. The continued drive to recover non-performing loans (NPLs) coupled with prudent credit appraisal policies have helped in reducing further provisioning requirement.

MCB has been able to demonstrate strong earning momentum despite declining interest rates by focusing on loan book growth, efficient utilization of funds and declining NPLs. Despite a less than proportionate reduction in return paid on deposits, MCB has been able to retain its net interest income by enhancing its lending to small and medium size retail clients.

The other reason MCB has been able to maintain margins in the face of declining return on government securities, was its asset mix management. The bank moved away from government securities and grew its loan book. The spurt came in year 2000, when credit offtake by the private sector was quite large as the manufacturing sector underwent BMR and consumer credit began picking up.

The government's efforts to bring down average lending interest rates poses a challenge to commercial banks particularly smaller banks. However, an extensive branch network coupled with its market standing, has enabled MCB to not only retain its market share but bolster its deposit base. As the private sector credit demand is expected to pick up, net advances are also anticipated to increase.

An important contributor to total revenue of a bank is trade finance activity. With a change in the composition of foreign trade, the pie is unlikely to become bigger. While the smaller banks may potentially be threatened because the big five will be able to exploit their franchise to retain their share. MCB's fee-based income is strongly linked with the volume of international trade between Pakistan and rest of the world.

MCB is probably one of the first local bank to extensively explore the opportunities prevailing in the consumer banking area. At present it has the largest ATM network in Pakistan. The launch of MCBswitch allows other banks to utilize MCB's ATM network. All MCBswitch members are able to use ATMs worldwide through Mastercard's international Cirrus network.

MCB has also entered into other consumer financing products which include: personal loan, auto financing and house financing scheme Pyra Ghar. This aims at catering to three different needs namely home purchase, home renovation and home construction. While the large MCB branch network makes it convenient for customers, its real strenth is attractive rate on interest.

MCB was able to retain its position as the undisputed market leader in Rupee Traveller Cheques by achieving sale of over Rs 152 billion during calendar year 2000. Besides the designated branches of MCB four other banks, Bank AL Habib, Faysal Bank, PICIC Commercial Bank and ABN Amro Bank, are involved in the sale of these cheques.

To conclude, it may be said that MCB is a full service bank with a strong franchise value. Yet efforts are being made to achieve new levels of excellence. MCB has a distinct edge over the others due to its sheer size which allows it to cater to the needs of large corporates as well as smaller businesses and individuals.