BRIGHT FUTURE FOR UBL 

Interview with Sir Mohammed Anwar Pervez OBE, HPk, Vice Chairman Board of Directors, United Bank Limited

Mar 31 - Apr 06, 2003

SIR MOHAMMED ANWAR PERVEZ, OBE, HPk first hit the headlines in 1992 when he became the proud recipient of the Order of the British Empire. He was also awarded a Knights Bachelor in the Queen’s Birthday Honours list for services to business and the world of charity in the UK and internationally. The highest civil award of Pakistan "Hilal-e-Pakistan" was conferred on him by the President of Pakistan in March 2000.

The Bestway group of which he is the Chairman was widely known as the owner of twenty eight cash and carry stores throughout England and Wales. In 1998, the group started its investments in Pakistan with the opening of Bestway Cement manufacturing plant in Haripur. United Bank Limited is the latest acquisition which they purchased on its privatization after forming a consortium of Abu Dhabi & Bestway Groups.

During his visit to Karachi last week, in an exclusive interview Sir Mohammed Anwar Pervez, Vice Chairman, UBL shared with us his experience and successes in the world of business. He explained the rationale of making huge investment in Pakistan and specially buying out the United Bank Limited.

Q. What prompted you to invest in Pakistan and specially in the equity of UBL?

A. UBL was the largest privatization attempted by the Government of Pakistan, launched in June 2001, with 21 interested parties. It was impacted by the adverse developments of the September 11, 2001 and was finally concluded in October 2002 by which stage only three bidders were left. The consortium comprising Bestway Group (BG), out of the UK and Abu Dhabi Group (ADG) from the UAE were finally the winners at a record price. This signaled the strong confidence reposed by these investor groups, in the improved governance of the country, the economic potential, the banking opportunity and the existing management of the bank.

Both BG and ADG, like other overseas investors were aware of the short-term sluggishness of the economy, a resource starved government and the need for improvement in infrastructure, security and regulatory environment. However, we also saw the opportunity of a large, absolute educated workforce which is English speaking, IT enabled, untapped and underdeveloped resources, greater discipline in governance, improving reserves, a large local savings pool and low interest rates.

With a competent management, a talented workforce and uncompromising standards of merit and adequately scaled production capacity not only focussed on domestic but also international demand, we are confident such investments can overcome the challenges of Pakistan and exploit both Pakistan and international opportunities to create commercial successes, both for ourselves and for the country. We believe we can achieve commercial success without depending on unsustainable privileges, subsidies and tariffs.

Both investors groups are expecting UBL to surface other investment opportunities in Pakistan and the region. Such opportunities will also be associated with investments by other investors groups. In our acquisition of UBL, our aim is to illustrate how through a privatization a showcase institution of the highest international standards can be created using the best indigenous talent available in the region. This is to engender confidence into other potential investors to pursue other similar opportunities.

Q. What has been the performance of UBL at the year end 2002?

A. A quick glance over the year end achievements and their comparison with the financial results of the previous year reinforces our conviction about investment in UBL.

UBL’s profits before taxation showed an increase of 88% over the previous year and touched the high level of Rs 2.8 billion. The profit after taxation increased by 635%, total assets by 14%, Shareholders Equity by 407% and home remittances by 112%. The total deposits of the Bank showed an increase of 15% over the previous year and stood at Rs 162 billion. Major increase in our deposits was of low interest bearing type which reduces our financial costs. The bank handled over Rs 134 billion of import and export business which reflects an increase of 17% over the figures of the previous year.

The non-performing loans decreased by another Rs 6 billion and have now come down to the low level of Rs 5.7 billion. I think it is in the area of large scale decrease in the volume of non-performing loans that the bank management has performed exceptionally well during the last three years. UBL’s investment port-folio has shown an increase of 136% in just one year. In a period when lending is not growing in proportion with the growth in deposits, the surplus funds deposited in securities are earning attractive returns for the bank.

Q. Are you satisfied with these results which hardly cover full year as a privatized bank?

A. Yes, the figures at the end of the very first financial year are better than what we had expected. Nothing proves the soundness of our judgment better than the results that have already been achieved and are here before you.

Q. What new products the bank has launched since privatization?

A. It may please your readers to know that since privatization (during the last 3 months) we have launched 3 new products:

A) UNITED MONEY MARKET FUND: The first open-ended Fixed Income Fund in Pakistan. The benefits are:

I. SAFETY

• backed by investment in Blue Chip Companies instruments

II. YIELD

• attractive daily return over 8% p.a. (last three months)

• no penalty on sale and encashment

III. CONVENIENCE

• encashment in just three days

• buy and sell at any UBL branch — nation wide

It has been heralded by Chairman, Securities & Exchange Commission of Pakistan (SECP - Regulator) as the most professionally structured fund of international standards ever offered to investors in Pakistan.

B) BRAND NAME — UBONLINE: is a web/internet based account enquiry service to all UBL customers throughout the country. Customers can access info on accounts across the country and worldwide round the clock from the comfort of their home or offices using their PC or mobile phone. Further enhancement is underway enabling customers to transfer, pay utility bills and make investment from their own home and offices.

C) BRAND NAME — UNIREMOTE: is introduced to conduct Inter-branch banking at all activated hubs throughout the country, add-on to UBLonLine. It ultimately enables customers to transact from any online bank (200 branches countrywide).

Brand name — TezRaftsar is 24 hours delivery of remittances service to Pakistan by overseas Pakistanis. The volumes have trebled since last year.

Master (Credit) Card has been launched for customers in the Gulf along with the supporting 24 hours call centre.

We are also upgrading/improving ATM network and e-commerce across the bank.

Other innovative products are also in hand to be launched shortly.

Q. What kind of challenges do you foresee and how do you plan to convert these into opportunities?

A. Due to general conditions in the money market, lending is not commensurate with deposits. Thus the major challenge before any financial institution today is to find attractive avenues for investing its surplus funds. The fall in interest rates effects the profitability of financial institutions, but it can have a positive impact if the off take of advances and the total volumes of performing loans can be increased in proportion to the growth deposits. Our focus will be on SMEs, Agricultural and related industry advances and Housing Sector loans. These sectors of our society are in dire need of bank credits. These are the largest employment generators and offer major potential for the country.

As you know Pakistan offers the opportunity of creating an agricultural surplus (potentially for export) of three times what it consumes. To achieve these integrated solutions are warranted that will improve farmer yield, productivity and profitability as well storage, grading and marketing services. UBL is committed to promoting all of these. The first such project that UBL is supporting is the Agrimall project.

UBL’s Agrimall project comprises franchised shops in all major agricultural union councils that will provide essential farm services ranging from supplies of all farm inputs, leasing of sophisticated farm machinery and farming advice to farmers intending to improve the productivity and output under one roof. UBL’s own contribution will be in the shape of branches, at or in close proximity to each Agrimall, which we extend credit to these shops and to their farmer customers.

OTHER PROJECTS WILL BE ANNOUNCED IN DUE COURSE.

There is a paucity of good investment opportunity for large part of the country’s local savings pool. UBL intend to address this by channeling most of the equity investment opportunities to local savings and saving institutions. This will encourage local capital formation. A smaller portion will be retained for overseas investors specifically for those who offers clients value addition by creating access to overseas market and technology which will create products for the most sophisticated markets and not just for the domestic market. This will help avoiding deterioration of the country’s future Balance of Payment.

Q. What major deals your bank has finalized in the recent past?

A. We have jointly Lead Managed — for a major Customer issuance of Term Finance Certificate (TFCs) of US$ 260 million (the largest ever TFC issue in Pakistan).

We have developed Listed Asset Backed Securitization of the future receivables for Mobile Phone Co. worth US$ 17 million — First ever deal of its kind in Pakistan.

For purchase of Boeing 777 for our National Flag Carrier (PIA), we have advised and arranged short-term financing of US$ 85 million. We are also advising and arranging of a long-term financing of US$ 150 million to them.

For a major textile group, we advised and arranged the issuance of TFCs of US$ 17 million  the largest TFC issue in the Textile Sector.

For a major national corporate, we advised and arranged a 5 year syndicated offshore morabaha financing worth US$ 70 million.

Q. Does the bank plan to close down its loss making branches?

A. Well, it is easy to close down loss making branches and increase the overall profits. But the challenge before a dynamic and forward looking professional management is to convert the loss making branches into profit making units. The new strategies being followed by UBL are basically customer focused. Our aim is to provide banking services to larger segments of our society, even to those sections which have not even been introduced to banking services as yet. We will realign branches to positions where the business potential is greater.

Q. In order to meet the Human Resource requirements for the kind of initiatives that UBL wants to undertake and is already undertaking, do you feel that the bank has the required manpower and that too of the level that may be needed?

A. As a service organization, Human Resources are our most significant assets. Their development is a continuous process. It is very satisfying to note that during the turnaround years UBL’s management had laid the greatest emphasis on raising the levels and skills of the bank’s human resource. The level of technology is continuously rising. UBL cannot afford to be left behind. Our new HR policy is to make substantial investments in improving our most productive asset and upgrade their professional skills. Our strategy will be to have accountability at all levels. We have also recently made some structural changes in the organization chart at the mid-management level.

Q. What will be the new pillars of corporate culture of UBL?

A. With our powerful drive and determination to excel, the following will be the pillars of our corporate culture:

MANAGEMENT OF HUMAN RESOURCE — OUR GREATEST ASSET

• Accountability at all levels

• Benchmarking positions

• No transfers, instead all open positions to be subjected to internal and external competition

• Raising professional standards through continuous training (we will nurture those who are non performers or slow performers.

FOCUS ON CUSTOMERS & CUSTOMER SOLUTIONS

• Innovation, customer sensitivity and service.

• Scientific and objective analysis of Need Gaps for new products introduction

Q. How do you visualize the future of UBL?

A. I believe in optimism and my focus has always been on the bright side of the canvas. Our teams appear to be highly motivated. We will be shortly launching some innovative and customer-friendly products. Our regions are further intensifying their relationship with customers. With the support of our customers and hard work of our teams, I foresee that UBL has a very bright future.