Research Analyst
Nov 8 - 14, 2010

Summit Bank (formerly Arif Habib Bank) is one of the fastest growing commercial bank of the country supported by Suroor Investments. The management intends to double the capital in a short period by injection of fresh capital, which will strengthen the bank further.


Pre tax loss for the period (551,091) (2,285,586)
Equity 3,752,846 4,065,941
Paid up capital 5,000,000 5,000,000
Deposits 31,136,654 31,307,488
Advances 21,032,810 18,503,815
Investments 11,735,222 12,446,033
Basic and diluted (loss) per share (Rs) (0.63) (4.13)

Summit Bank's saving account is the most convenient way to manage the customers' savings in local and foreign currency. The bank's saving account has been designed to provide their customer with easy access as well as a higher rate of profit. Moreover, the bank has an easy understanding range of home loans with something for everyone. The value and flexibility that Summit Bank home finance offers are complemented by exceptionally personalised service.

The bank has a network of 40 branches/sub branches. The branch network covers Sindh, Punjab, Khyber Pakhtunkhwa, Balochistan, and Azad Jammu and Kashmir. The bank plans to open further offices to better cover all four provinces within a short time span. The bank has an authorized share capital of six billion rupees and paid-up share capital of five billion rupees.

During the period under review, the total assets of the bank grew by 8.4 per cent to Rs41.4 billion with advances (net of provisions) showing a growth of 13.7 per cent to Rs21 billion. Despite significant repayment of high cost money to the institutional depositors, with some roll-overs at lower rates, the bank was able to maintain its deposits base up till September 30, 2010. However, the bank was also able to reduce the cost of deposits from 9.9 per cent in December 2009 to 9.5 per cent for the nine months ended September 30, 2010.

During the nine months, the bank incurred a pre-tax loss of Rs 551.1 million due to additional provisions of Rs568.9 million made against the NPLs, which were primarily due to the downgrading of existing NPLs and addition of a few more accounts as at September 30, 2010.

The bank has made concentrated efforts for recovery against the NPLs. There has been some success, and the current NPLs stand at Rs4,716.1 million as opposed to Rs5,016.8 million as at December 31, 2009. Despite some additions during the period, administration expenses increased by 19.2 per cent to Rs910.8 million as compared to the corresponding period of last year. This was mainly due to an increase in the branch network from 24 branches last year.

Despite of all these, earnings of the banking industry in the country rose 24 per cent (YoY) in FY09 from Rs53.2 billion to Rs66 billion. This increase was primarily driven by a rise in the net interest income owing to high banking spreads. In FY09, the average banking spread increased 10.9 per cent (YoY) to 7.52 per cent. Banks continue to retain profits and issue bonus shares to increase their equity holdings in order to meet the State Bank's Minimum Capital Requirement (MCR). Furthermore, expanding branch operations continue to cause an increase in operating expenses. Provisions to NPLs rose in FY09 from 69.6 per cent to 70 per cent, which covered losses from the higher infection rate in the year under consideration. The NPLs to loans ratio increased from 10.5 per cent in FY08 to 11.9 per cent in FY09 indicating increasing liquidity crunch due to the higher lending rates.

The growth in deposits of the banking system has been weakening since January 2008 in the wake of continuous external account pressures and shift in public preference away from deposits due to high inflation. In October 2008, banks suffered a major shock as deposit base eroded by Rs90 billion due to concerns on stability of local banks in view of global financial crisis. This trend however changed in the last two months of FY09 when the deposit base sharply expanded by Rs331.9 billion. In overall terms, deposit growth decelerated from 13.8 per cent in FY08 to 7.8 per cent in FY09. Continuing last year's trend, the banking advances witnessed an increasing shift towards the public sector in light of the heightened credit risk caused by the stock market crash in 2008 followed by the liquidity crunch in the economy. ADR decreased from 75.5 per cent to 69.7 per cent in FY09 due to rising risk-averseness of the private banks.



31-12-2008 5.0 5.0
31-12-2009 6.0 6.0
31-12-2010 10.0 7.0
31-12-2011 15.0 8.0
31-12-2012 19.0 9.0
31-12-2013 23.0 10.0

To restore macroeconomic stability and improve credit supply, State Bank of Pakistan took a number of measures in phases and relaxed the statutory cash and liquidity reserves requirements. In 2008, the State bank announced new MCR for next five years. In Dec 2008 the State bank required Rs5 billion, in Dec 2009 Rs6 billion, Dec 2010 Rs7 billion, Dec 2011 Rs8 billion, Dec 2012 Rs9 billion and Dec 2013 Rs10 billion.


The global financial crisis has trickling down effects on Pakistan's banking system. The financial sector is facing its downsides but still on a comparative basis it is better than other neighboring countries owing to regulations and the role of SBP to take timely corrective measures. Despite the economic issues in the country, Summit Bank is striving to maintain its superior market position as it continues to improve its branch network extensively through upgrades as well as product innovation.