ACQUISITION, MERGERS & CONSOLIDATIONS IN BANKING SECTOR IS A GLOBAL PHENOMENON'
Interview: Zafar Osmani, SEVP Habib Bank Ltd
Jan 15 - 21, 2007
The acquisition and mergers of smaller banks is not happening in Pakistan alone. In fact, it is a natural outcome of the growing competition in the banking system around the world leading to consolidation of financial resources as a global phenomenon.
These observations were made by Zafar Aziz Osmani, Senior Executive Vice President (SEVP), Habib Bank Limited, while discussing interesting developments especially acquisition and mergers in the banking sector in an interview with PAGE.
Osmani looked quite confident and positive about consolidation process and expressed the hope that arrival of international players in Pakistan by virtue of acquisitions and mergers with the local banks would help provide access to global financial market to Pakistani banks. This would also help broaden the scope of business in the fast changing global scenario as well as professional exposure to Pakistani banks.
Another positive side of the consolidation process in the banking sector, Osmani felt, would help impart international skills and introduce financial products in the domestic market, besides equipping the local banks with latest skills.
When his attention was drawn towards the concerns being expressed by certain quarters that foreign banks were becoming a dominating force in our financial system, which might bring some undesirable economic and political repercussions on our socio-economic life.
Zafar Aziz Osmani, a seasoned banker who carries a worldwide exposure to his professional experience, however, did not agree with the idea. Actually, such apprehensions indicate a negative approach, in fact, in today's border-less global scenario the survival is only for the fittest. It is high time for our banking system to adhere and adopt the international standards and grab the available opportunities in the international market. Citing the example of launching GDRs of Muslim Commercial Bank and OGDCL in the international financial market is also the part of the globalization process. "As far as the political or social impact of the mergers and acquisitions is concerned, no one could do any harm to your social and economic life provided you have developed a strong economic and social structure capable to withstand the pressures."
In fact, it is for the first time that our economy is growing on sound footing as a result of political stability quite visible in our society. Our macro economic indicators are attractive rather fascinating for the international investors. Our economy is growing at an impressive growth rate of 7 percent that also shows economic stability.
Actually, a major factor which is attracting the international banking players is the handsome returns apparently reflected in the financial results of the banks during last three to four years. As a result of growing competition in the banking sector, the market forces alone would decide the profit margins in the days to come. Another factor appealing to the foreign investors in our banking system is the liberalized financial policies and lesser intervention on the part of regulators.
When asked to comment on the performance of Habib Bank especially after taking over the management shares by Aga Khan Foundation, Osmani observed with a smile on his face that in many ways Habib Bank has set an example for others to follow.
In order to substantiate his views, Osmani recalled the days when HBL was the baby of the public sector. On the back of political pulls, the then governments used to provide jobs on political considerations in the state-run organization without looking into the fact whether or not the induction of the people will help the bank achieve value addition.
There was a concept in those days that it is the responsibility of the government to provide jobs to the people whether they are capable or not. Consequently, the bank had to pay salaries to a huge workforce touching the figure of 18,000 workers.
When the private sector took over the public sector entities they obviously had to look and take care of their commercial interests. Resultantly, a process of right-sizing was introduced in different organizations and the surplus staff was laid off through various schemes, including golden handshake and voluntary separation schemes to attain economic viability.
However, as far as HBL is concerned, it handled the overstaff issue in a different way giving priority to human considerations as well.
Out of 18,000 workers, the bank laid off around 4,000 but in a unique way. Actually, there was an army of peons, messengers, security staff and drivers in HBL.
"We did away with the culture of peons and drivers by outsourcing the job. The companies selected for outsourcing were asked to induct our drivers and security guards at reasonable salaries, besides the bank acquired a certain share of these outsourcing companies and those shares were transferred to the retrenched staff of the bank. Now our former staff is also on job rather owners of those private companies. This was, of course, a unique way of rightsizing the overstaffed organization, which should be followed by others as well."
Zafar Aziz Osmani is currently working as Senior Executive Vice President and Member Management Committee, heading the Corporate Planning and Organization Development Group at Habib Bank Ltd.
His responsibilities include strategic corporate planning for HBL's local and international operations. His role includes building up teams of professionals, bridging cultural gaps and modernizing the organization structure and process at HBL. He is also responsible for HBL's Corporate Affairs, Public Relations and Sports Divisions with a very high degree of interaction with the business community, Press and major sports organizations in Pakistan.
After completing his Masters in International Relations and Political Science and graduating in Law from Karachi and Punjab universities, Osmani started his career in the Central Superior Services (Taxation Group) of Pakistan in 1970. He moved to the corporate sector in 1978 with Exxon Chemicals. Osmani moved to Bahrain in 1985 to work as Human Resources Manager for Gulf International Bank. He returned to Pakistan in 1991 to take up the assignment of Director Human Resources for American Express Bank, Karachi. While with the American Express he also worked as Director Compensation (Asia Pacific Region) based in Singapore and held Human Resources responsibilities for the bank's Pakistan and Bangladesh operations. He joined Pak Kuwait Investment Company in 1997 as Head of Corporate Planning & Human Resources.
During 2002 to 2005 he served as the first Member Human Resource Management at CBR with the Government of Pakistan where major HR restructuring and reforms were undertaken and process for a long-term institutional and cultural change was initiated. Besides his professional activities, Osmani also finds time to work as a social worker and playing an active role in charity fund raising projects for Rotary, Shaukat Khannum Trust and various other philanthropic institutions.