INTERESTING DEVELOPMENTS IN BANKING SECTOR
Foreign banks coming in the limelight
Jan 15 - 21, 2007
Though the transfer of Habib Bank to Agha Khan Foundation and the acquisition of Union Bank by Standard Chartered were the noticeable events in the banking scenario, yet the role being played by some of the foreign banks introducing Pakistan in the international debt market is much more significant.
Ishrat Hussain, former Governor of the State Bank was the author of the story of acquisitions and mergers of smaller banks in Pakistan. It all started two years back when he un a policy decision enhanced the paid-up capital limit from Rs1 billion to Rs6 billion by 2008. Besides that the improved financial stability and enhanced credit rating of Pakistan by the international credit rating agencies also triggered the interest of the international players in this market. More interesting developments are in the store as change of hands are likely to take place in a number of banks including Soneri Bank, First Women Bank, Pakistan Industrial Development Bank, Prime Bank and My Bank probably in March or April this year
Actually, the stellar growth registered by the banking sector portrays a business boom for the privatized banks which continued to dominate the credit growth on the back of outstanding performance of the large scale manufacturing sector as well as the growing consumer market for quite sometime.
However, the share of the local banks in international credit declined to 52.6 percent in the preceding year because most of this share was captured by the sharp growth in credit expansion by foreign banks.
The share of foreign banks in incremental credit has increased from 5 percent in financial year 2005 to 7.1 percent during financial year 2006. This growth, however, reflects the widening spread between the lending rates offered by domestic banks and foreign banks.
Coming back to the prominent role being played by the foreign banks, it may be mentioned that Deutsche Bank has claimed to be the number one arranger of major currency debt for Asian governments and corporates in 2006.
MINIMUM CAPITAL REQUIREMENTS FOR BANKS/DFIs
MINIMUM PAID-UP CAPITAL
DEADLINE BY WHICH TO BE INCREASED
(net of losses) to be increased to :
a) Rs 3 billion
b) Rs 4 billion
c) Rs 5 billion
d) Rs 6 billion
Source: State bank of Pakistan
In US dollar, euro and yen Asia bonds, Deutsche Bank in Asia (excluding Japan) completed a total of 30 deals worth USD 4.85 billion in 2006.
Deutsche Bank also carries the distinction to be involved in both international bond issues out of Pakistan in 2006.
This included a USD250 million deal for Mobilink, which was the first corporate bond to be issued out of Pakistan for over 12 years. Deutsche also managed a USD800 million dual tranche issue for Pakistan in March. The deal comprised USD300 million of 30-year bonds, the first-ever 30-year bond to be issued from Pakistan, and USD500 million of 10-year bonds. This follows Deutsche Bank's involvement in another landmark transaction in 2004 when it executed the Republic's first sovereign bond issue since 1999.
Shazad Dada, Deutsche Bank AG Chief Country Officer and Head of Global Banking in Pakistan, says Pakistan's growing economy and pro-market reforms will continue to contribute towards development of the country's borrowers amongst international investors.
"The public and private sectors in Pakistan continue to raise the profile of the country's borrowers abroad. Deutsche Bank's strong local presence in Pakistan, combined with its leading regional and global capital markets platform, provides local issuers with access to a diverse and efficient source of funding", he said.
Rahul Mookerjee, Head of Issuer and Investor Coverage at Deutsche Bank in Asia, says the rankings demonstrate the strength of Deutsche's capital markets platform in Asia.
"Deutsche Bank's strong local presence throughout Asia enables us to tailor financing packages to meet our clients" needs. Deutsche's strong track record demonstrates our ability to provide an efficient, liquid capital markets platform to meet the unique needs of our diverse Asian client base," said Mr. Mookerjee. ì2006 was a strong year for our debt capital market business, with all deals successfully completed".
IFR Asia and Best Bond House and Best Equity-Linked House recently awarded Best Bond House Deutsche Bank by FinanceAsia in their 2006 awards.
DUBAI ISLAMIC BANK
Dubai Islamic Bank has also announced that it has arranged to sell US$85.3 million of sukuks, or Islamic bonds, to two companies in Pakistan - Karachi Shipyard and Engineering Works (KSEW), the state-run shipyard; and Sui Southern Gas, the second-biggest gas distributor in Pakistan.
Saad Zaman, CEO of DIB Pakistan and Deputy CEO of Millennium Capital, said: "DIB will sell Rs4.2 billion of Islamic bonds to Karachi Shipyard and Engineering Works, and Rs1 billion of Islamic bonds to Sui Southern Gas. Karachi Shipyard's bonds will be sold in installments, with the first phase floated in early 2007î.
He added: "DIB is seeking to play a major role in attracting investment from the Gulf countries into Pakistan, particularly in the critical sectors of ports, shipping and real estate."
The KSEW sukuk will be used to finance the up-gradation and modernization of the shipyard and will have the special feature of reserve eligibility for Islamic banks. Other than WAPDA sukuk issued early 2006, KSEW sukuk will be the only reserve eligible instrument/ security which will go a long way in the growth and development of the Islamic banking in Pakistan.
The Sui Southern Gas sukuk will be used to finance expansion in the energy exploration area. DIB also participated in the two sukuks issued by Sitara Chemicals worth Rs.1.725 billion/ US$28.3 million for the expansion of their existing chemical plant and setting-up of in-house power generating facilities.
UBL LAUNCH "STAR BRANCHES"
"UBL Star Branches" was launched in a glamorous launch ceremony by the President & CEO UBL, Mr. Atif R. Bokhari in November, 2006 at a ceremony held at a local hotel.
Star Branches is a new initiative taken by UBL's Commercial Banking Group in its program of constant improvement to its branch network and to provide its customer the experience of a world class bank. Under the program 100 branches have been declared as Star Branches that will undergo considerable upgrade and improve their level of service and product provision to the next level. This will then be emulated by other branches in the network and the scope of the program will be increased over time.
The launch event was attended by members of the senior management from the Head Office along with all Regional Chief Executives (RCEs), which gave a clear signal of the strong commitment towards the Star Branches concept from the highest echelons of the bank's management.
The Star Branches concept has been developed to help the bank sustain business growth at a time when customers are becoming increasingly demanding and have a wide array of choices in terms of banks. All banks therefore need to re-invent themselves and their offerings to consumers constantly in order to retain customer loyalty. As customers become more discerning, factors beyond products are now ranking high on their priorities. It is therefore increasingly important for any bank to work to provide an environment that is aesthetically pleasing, staff that is not only trained to provide standard banking services but also to advise consumers to augment their understanding of banking products and services. In short, the consumer's expectations of what constitutes a professionally managed bank is changing and the Star Branches program is designed to help the bank's branch network achieve a more consumer centric face.
In terms of products, Star Branches will carry the full array of Pak Rupee and FCY current, savings, term and other depository products and carry the full range of consumer banking products where applicable. Customers will also be able to access a wider selection of UBL Fund Manager offerings, Ameen Islamic Banking windows and UBL Insurers products as well.
All Star Branches will be renovated, automated and online, equipped with ATMs and work to ensure that the highest standard of customer service is delivered across the board.
At the launch ceremony UBL President Mr. Atif R. Bokhari appreciated the efforts of the entire team in making such a wide-ranging launch possible and stressed the need to "make the initiative a success for the benefit of UBL's Customers."