WHERE THE BANKS ARE UTILIZING THEIR DEPOSITS?

Return to depositors is low due to concentration of investment in the GoP securities

By SHABBIR H. KAZMI
June
09 - 15, 2003

A loser look at the composition of investment and advances of commercial banks indicates that they prefer to invest in low yielding government securities. This strategy may provide a safe haven to the banks but has deprived the depositors from a fair return on their deposits. It may be true that credit offtake of private sector was low in the past. However, banks must get rid of this policy and explore new areas by assuming calculated risk, strictly based on prudent lending policies.

The analysis balance sheets of 17 commercial banks show that they have total deposits exceeding one trillion rupee. Bulk of the deposits belongs to individuals. Out of these four banks, NBP (Rs 363 bn), HBL (Rs 328 bn), UBL (Rs 155 bn) and MCB (Rs 183 bn) enjoy the largest share. ACB is yet another bank, which has more than fifty billion rupee deposits.

These banks have extended advances aggregating to nearly Rs 565 billion or half of the total deposits. HBL enjoys the lion's share (Rs 168 bn) followed by NBP (Rs 141 bn), MCB (Rs 79 bn), UBL (Rs 74 bn) and ACB (Rs 30 bn). KASB bank has the smallest share advances Rs 490 million. It is worth noting that bulk advances of most of the banks comprised of less than one-year maturity. It is often complained that textile sector is the biggest defaulter but the largest portion of advances still pertains to this sector, the backbone of Pakistan's economy.

Total investments of banks are Rs 501 billion, slightly lower than advances. NBP enjoy the highest share with Rs 144 billion followed by HBL (Rs 142 bn), MCB (Rs 90 bn) and UBL (Rs 69 bn). Among the remaining banks ACB and Bank AL Habib have investments worth Rs 27 billion and Rs 19 billion respectively.

HBL has total investment of over Rs 142 billion. Out of this Rs 90 billion is invested in treasury bills, Rs 13 billion in Pakistan Investment Bonds and another Rs 14 billion in GoP guaranteed bonds. Only Rs 2.441 billion has been invested in listed companies.

ACB has an investment portfolio of Rs 27 billion. Out of this slightly more than Rs 23 billion has been invested in federal government securities. Only Rs one billion has been invested in term finance certificates and another Rs 97 million has been invested in listed and unlisted companies.

MCB's investment portfolio of about Rs 90 billion, mostly comprise of federal government securities. Rs 54 billion has been invested in treasury bills and Rs 11 billion in Pakistan Investment Bonds.

Bank Al Habib's almost entire investment is confined to treasury bills and Pakistan Investment Bonds amounting to over Rs 18 billion, out of a total investment portfolio of Rs 18.831 billion. Treasury bills offer yield ranging from 4.43% to 7% per annum.

Pakistan Investment Bonds offer yield ranging from 4.47% to 14% and Federal Investment Bonds of ten years maturity yield 15% per annum return.

COMMERCIAL BANKS FUNDS UTILIZATION
(Rs in million)

 

Paid-up capital

Total equity

Deposits

Advances

Investments

ACB

1,087

3,026

51,732

30,035

26,759

BAH

866

1,822

34,240

23,775

18,831

BoP

1,004

2,363

23,767

6,621

8,295

BB

1,016

1,112

7,761

3,298

1,328

FB

2,648

4,120

24,554

21,935

6,842

HBL

12,178

12,274

328,182

167,523

142,877

KB

616

593

2,640

490

2,118

MB

1,001

1,476

5,079

3,532

856

Metro

1,000

2,074

28,515

19,444

15,013

MCB

2,665

6,314

182,706

78,924

89,610

NBP

3,730

14,279

362,866

140,547

143,525

PCB

825

1,323

21,155

10,876

10,306

PB

1,008

1,380

14,640

9,016

7,534

SPB

1,500

803

12,341

8,522

6,365

SB

1,018

1,792

20,545

11,378

9,844

UB

1,626

2,243

37,760

28,890

11,822

UBL

5,180

8,626

154,915

74,117

69,385

 

33,788

56,994

1,158,483

564,806

501,925

Source: Annual Report