Standard Chartered Bank

A

Mo Pakistan St ney an Ban da kin grd & Fin Ch anc art e er ed Ba nk

LOCALLY EMBEDDED

INTERNATIONAL BANK

Standard Chartered Bank

[MONE Y BANKING & FINANCE] FINANCE ]

Submitted By:

Bilal Yasir +92345-8703330

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STANDARD CHARTERED BANK (PAKISTAN) L IMITED - A

LOCALLY

EMBEDDED INTERNATIONAL BANK

OVERVIEW Standard Chartered was formed in 1969 through a merger of two banks: The Standard Bank of British South Africa, founded in 1863, and the Chartered Bank of India, Australia and China, founded in 1853. Both companies were keen to capitalize on the huge expansion of trade and to earn the handsome profits to be made from financing the movement of goods between Europe, Asia and Africa. founded by James Wilson following the grant of a Royal Chart Charter er by Quee Queen n Vict Victor oria ia in 18 1853 53.. Chart Charter ered ed open opened ed its its firs firstt branc branche hes s in Mumbai (Bombay), Kolkata and Shanghai in 1858, followed by Hong Kong and Singapore in 1859. The Chartered bank was

The Standard Bank was

founded in the Cape Province of South Africa in 1862 by

John Paterson. It was a commenced business in Port Elizabeth, in January 1863. It was was prom promin inen entt in fina financ ncin ing g the the deve develo lopm pmen entt of the the diam diamon ond d fiel fields ds of Kimberley from 1867 and later extended its network further north to the new town of Johannesburg when gold was discovered there in 1885. It expanded in Southern, Central and Eastern Africa and, by 1953, had 600 offices. In 1965, it merged with the Bank of West Africa, expanding its operations into Cameroon, Gambia, Ghana, Nigeria and Sierra Leone. From the early 1990s, Standard Chartered has focused on developing its strong franchises in Asia, Africa and the Middle East. It has concentrated on consumer, corporate and institutional banking and on the provision of treasury services areas in which the Group had particular strength and expertise.

STANDARD CHARTERED Y EAR EAR

BANK IN

PAKISTAN :

OF SETUP

Standard Standard Chartered Chartered is the largest internationa internationall Bank in Pakistan. Pakistan. In Pakistan Pakistan it established operations in Karachi in year 1863. In 2006 Standard Chartered Bank acquired acquired Pakistan's Pakistan's Union Union Bank Bank. On 30 Decemb December er 20 2006 06,, Standa Standard rd Charte Chartered red merged Union Bank with its own subsidiary. After the acquisition of Union Bank the new entity Standard Chartered Bank (Pakistan) Limited was incorporated as a subsidiary subsidiary of Standard Standard Chartered Chartered PLC. Standard Standard Chartered Chartered Bank (Pakistan), (Pakistan), to create Pakistan's sixth largest bank.

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NUMBER

OF


BRANCHES

The bank has a network of over 174* branches in 41 cities in Pakistan adding 154 branches and 33 cities over last four years. Standard Chartered employs a work workfo forc rce e of over over 9,00 9,000 0 empl employ oyee ees s in its its Paki Pakist stan an oper operat atio ions ns.. Stan Standa dard rd Charter Chartered ed Bank Bank has a networ network k of over over 20 200 0 ATMs ATMs across across Pakista Pakistan. n. Standa Standard rd Chartered has a network of over 1,600 branches and outlets and 5,500 ATMs in more than 70 countries and territories across the globe, making it one of the world's most international banks.

PERFORMANCE As one of the world's most international banks, Standard Chartered employs 70,000 people, representing with 125 nationalities, worldwide. This diversity lies at the heart of the Bank's values and supports the Bank's growth as the world increasingly becomes one market. With strong organic growth supported by strategic alliances and acquisitions and driven by its strengths in the balance and diversity of its business, products, geography and people, Standard Chartered is well positioned in the emerging trade corridors of Asia, Africa and the Middle East. Standard Chartered derives over 90 per cent of profits from Asia, Africa and the Midd Middle le East East.. Serv Servin ing g both both Cons Consum umer er and and Whol Wholes esal ale e Bank Bankin ing g cust custom omer ers s worldwide, the Bank combines deep local knowledge with global capability to offer a wide range of innovative products and services as well as award-winning solutions. Tru Trust sted ed acro across ss its its netw networ ork k for for its its stan standar dard d of gove govern rnanc ance e and and corp corpor orate ate responsibility, Standard Chartered takes a long term view of the consequences of its actions to ensure that the Bank builds a sustainable business through social inclusion, environmental protection and good governance. Standard Standard Chartered Chartered is also committed committed to all its stakeholder stakeholders s by living living its values in its approa approach ch towards towards managi managing ng its people people,, exceed exceeding ing expect expectati ations ons of its customers, customers, making a difference difference in communiti communities es and working with regulators. regulators. Standard chartered bank is the first international bank to get an Islamic banking license and to open the first Islamic banking branch bra nch in Pakistan.

CREDIT RATING Pakistan Credit Rating Agency (PACRA) has maintained the Bank’s long-term and short-term ratings “AAA” (Triple A) “A1+” (A One Plus) respectively in 2008. The Bank’s outstanding two listed, subordinated TFCs are also assigned “AAA” rating. These ratings denote the lowest expectation of credit risk emanating from an exceptionally strong capacity for timely payment of financial commitments.

EXTERNAL AUDITORS

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The The audi auditt comm commit itte tee e has has su sugg gges este ted d the the name name of M/s M/s KPMG KPMG Tase Taseer er Hadi Hadi & Company, Chartered Accountants as external auditors of the bank for the next term. The retiring auditors, being eligible, offer themselves for re-appointment till the conclusion of next Annual General Meeting.

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ORGANIZATIONAL STRUCTURE

ORGANOGRAM

OF

STANDARD CHARTERED BANK

BALANCE SHEET

BALANCE SHEET ANALYSIS Pakistan's Pakistan's banking banking sector sector has remained remained remarkably remarkably resilient resilient,, despite despite pressures pressures emanat emanating ing from from weake weakenin ning g macroe macroecon conomi omic c enviro environme nment. nt. Enhanc Enhanced ed capita capitall requirement since last couple of years has resulted in consolidation within the industry which we expect to continue in the near future. Capital adequacy of the

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banking system was 11.8% at end-Sep'08. Tier 1 capital ratio of the banking system was 9.7%. However, challenges remain in terms of NPLs emanating from some of the more leveraged sectors. Total assets of the bank grew to PKR 264.6 billion from last year's PKR 255.5 billion mainly due to increased lending in wholesale banking. Total net loans and advances increased by approximately 5% to PKR 125.60 billion from PKR 119.54 billion while deposit base was marginally reduced by 1.5% to PKR 174.5 billion comp compare ared d to PKR 17 177. 7.2 2 bill billio ion n last last year year.. The The bank bank cont contin inue ues s to main mainta tain in adequate liquidity. The advances to deposit ratio as at December 31, 2008 was 72%.

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PROFIT

AND LOSS

ACCOUNT

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PROFIT

AND

LOSS

ACCOUNT

ANALYSIS:

Overall revenue of the Bank grew by 3% to PKR 23.0 billion for the year ended December 31, 2008 as against PKR 22.3 billion in 2007. Net Mark-up / Interest income income of PKR 16 16.4 .4 billi billion on was margin marginall ally y higher higher than last year. year. Wholes Wholesale ale banking Net Mark up / Interest income was 57% higher than last year primarily due due to an incr increa ease se in its its adva advanc nces es port portfo foli lio. o. This This grow growth th was was offs offset et by a reduction in the consumer banking interest income as at December 31, 2008. Consumer banking advances has reduced primarily due to the decision of the bank to be extra prudent on both secured and unsecured products. Non mark-up / interest income was 8% higher than last year primarily due to incr increa ease se in Consu Consume merr bank bankin ing g inco income me on acco accoun untt of value value adde added d Weal Wealth th management products. Despite double digit inflation and significant investment in technology, branch network and infrastructure, non mark-up expense have increased only by 4% to PKR 12.62 billion compared to last year PKR 12.16 billio billion. n. In line line with with our growth growth strate strategy gy the dis distri tribut bution ion networ network k was furthe furtherr enhanced by 33 branches. Total network now stands at 174 branches in 41 cities compared to 141 branches last year. For convenience of our customers 40 ATMs and 6 Cash Deposit Machines (CDM) were also added during the year under review. Profit after tax of the current year was PKR 630 million resulting in basic/diluted earnings of PKR 0.16 per share.

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PRODUCTS

PERSONAL BANKING 

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ACCOUNTS & DEPOSITS



•

•

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Supersave Account High Yield Account

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Flex Account

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Mahana Izaafa

Current Accounts

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•

•

•

MasterCard

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VISA Card

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Easy Credit Card

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American Express Credit Cards

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American Express Charge Card PIA Co-branded Credit Card

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VISA Shopping Card Plus

Rupee Current Account

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Treasures Catalogue

Xtra Mile Account Foreign Currency Accounts Business Account

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Sahulat Online Account Corporate Salary Account

•

•





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Other Financial Services

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PRIORITY BANKING The Right Partner

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Product Proposition

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Visa Platinum Debit Card

•

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Banking Convenience Rewards and Privileges Priority Center Locations

LOANS & MORTGAGES



Mortgages •

Home Purchase

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Home Credit

Loans •

Ready Cash

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Swift Finance



INSURANCE

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For Branch Banking Customers

Debit Cards

Basic Banking Account

•

•

Saadiq VISA Credit Cards

•



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Master Cashback Credit Cards

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Easy Saver Account Bonus Saver Account

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Credit Cards

Saving Account

•

•

CREDIT & DEBIT CARDS

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Savings Accounts •

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

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Iqra Education Plan

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Family Care

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Cash Cover Plus

For Credit Card Customers •

Smart Wallet

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Cover for Life

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Credit Cover Plus

INVESTMENTS

Mustaqbil

•

Taleem

•

Rishtey

Mutual Funds Basics

Mutual Funds Offered •

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Secure Life Plan

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Invest 'n' Assure

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•

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Tahaffuz

JS ABAMCO Limited National Investments Trust Limited

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Atlas Asset Management Limited

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Arif Habib Investments Management Limited

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BMA Asset Management Limited

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Standard Chartered Bank •

Rupee Term Deposits

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Interest Rates

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Mahana Amdani Certificates

•

Overdrafts

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Lockers

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ISLAMIC BANKING WHOLESALE BANKING

KASB Asset Management Limited

SME BANKING Business Accounts



Accounts & Deposits •

Saadiq Current Account

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Saadiq Sahulat Online Account

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Saadiq Saver

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Saadiq Term Account

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Transaction banking

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Tijarat Classic Account

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Tijarat Plus Account

Trade and Working Capital •

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Financial Markets

Corporate Finance

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Business Power

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Cash Today

Loans •

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Loans and Mortgages •

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Saadiq Home Financing

Credit & Debit Cards

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Principal Finance

Business Installment Loan

Industry Specific Solutions •

Kissan Card

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Rang Hi Rang

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Saadiq VISA Credit Cards

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Tana Bana

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Saadiq VISA Shopping Card

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Pharma Line

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Agri Deal

Modaraba •

Modaraba

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EXPLANATION ➢

OF

CERTAIN

IMPORTANT ACCOUNTS

SAVING ACCOUNT: Saving Account is the latest addition to Standard Chartered Bank Pakistan Limited’s ever increasing portfolio of products. This product combines a good rate of return, profit paid out on a six-monthly basis, and outstanding services offered by Standard Chartered Bank Pakistan Limited all-in-one.

Special Features

•

Exclusive benefits of a Saving Account: Profit tier rate 5% p.a APY Minimum average balance requirement is Rs. 100,000 Inter-branch transaction facility among 162 branches across Pakistan Customer Contact Center Profit calculated on a minimum balance basis

➢

BASIC BANKING ACCOUNT

• • • • •

Enjoy Enjoy an unmat unmatche ched d combi combinat nation ion of high high return returns s and liquid liquidity ity.. In addit addition ion,, SCB nationwide network of ATMs offers customer 24-hour convenience in withdrawing your funds, ensuring that money works for them, as they would like it.

Special Features •

Current account, mandatory introduced by State Bank of Pakistan

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Non-profit bearing

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Minimum Balance Required: None

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Account Statements: Issued on annual basis

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Account closure: If balance is Nil for 180 days

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Fees Fees:: Maxi Maximu mum m 2 free free depo deposi sits ts & 2 free free with withdr draw awal als s allo allowe wed d per per month. (Rs 100 will be charged after second transaction)

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Standard Chartered Bank ➢


RUPEE CURRENT ACCOUNTS For all customer day to day transactions, open a Current Account which offer via 162 online branches and a reliable country wide ATM network. Get easy access to funds as well as enjoy the privileges of having a Rupee Current Account.

Special Features

•

Local Currency Transaction account Non-profit bearing Minimum Balance Required: PKR 5000 Features: Unlimited withdrawals and deposits Offerings: (1) Chequebook (2) VISA debit card for local currency accounts Following Self Service banking facilities provided at time of account opening: Internet Banking SMS Banking Phone Banking Services

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XTRA MILE CURRENT ACCOUNT

• • • • • • •

•

An Ideal solution for people who want a Transactional Account with cash reward on fuel spend

Special Features • • • •

➢

Minimum Monthly Average Balance Requirement PKR 15,000 Fuel Cash Back up to 30% Debit Card with no issuance fee Transactional convenience through the use of wide branch network and self service channels

BUSINESS ACCOUNT Take customer business to soaring new heights with this account. Business Acco Ac coun untt prov provid ides es effi effici cien ent, t, acce access ssib ible le and and conv conven enie ient nt tran transa sact ctio iona nall capabilities of a world-class bank with highly competitive charges. Avail of the best transactional convenience on Business Account: •

Highly transaction current account aimed at rewarding the customer for their higher average balance maintained

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Non-profit bearing

•

Minimum Balance Required: Rs. 100,000

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Standard Chartered Bank • •

➢

Features: Unlimited withdrawals and deposits Offe Offeri ring ngs: s: (1) (1) Cheq Cheque uebo book ok (2) (2) VISA VISA debi debitt card card for for Loca Locall Curr Curren ency cy accounts

STANDARD CHARTERED SAADIQ PAKISTAN Standard Chartered Saadiq, was established as a dedicated Islamic Banking Division within Standard Chartered Bank (Pakistan) Limited with an aim to meet the unique needs of its customers Standard Chartered Saadiq comprises a team of qualified professionals who design and structure Islamic financial solutions and ensure that they are in line with Shariah principles on Islamic banking and finance At Standard Chartered it is realized realized that customers want products that are Shariah compliant, and by introducing these Islamic financial solutions, we are fulfilling our promise of being responsive to our customer needs. These products have been developed under the guidance of a dedicated Shariah Advisor

➢

TIJARAT CLASSIC ACCOUNT Tijarat Classic Account is a business account designed for small businesses with high number of transactions. Its low costs of transactions enable small businesses to conduct their transactions without worrying about the costs. With a minimum account balance of just Rs. 25,000/- avail free online banking facility up to a maximum of Rs. 1.5 Million a day, Tijarat Classic Account offers low cost, convenient and countrywide transaction capability.

SUHALUT ONLINE ACCOUNT Sahulat Online Account has been designed to provide efficient, accessible and conve conveni nien entt tran transac sacti tion onal al capa capabi bili liti ties es of a worl world-c d-cla lass ss bank bank with with high highly ly competitive charges.

Special features •

Non-profit bearing/Local Currency Account

•

Minimum Balance Required: Rs 50,000

•

Char Charge ges: s: PKR PKR 50 will be char charge ged d if Mont Monthl hly y Av Aver erag age e Balan alance ce not not Maintained

AVERAGE LENDING 16.33%

RATE OF

STANDARD CHARTERED BANK

OF

PAKISTAN

IS

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DEPOSITS & A DVANCES: DEPOSITS

Deposits Deposits from notes to the consolidated consolidated financial statements statements shows that fixed deposits increased as of saving deposits increased similarly, Current account decreased but as we make conclusion out of it, deposits of 2007 was greater as compared to deposits of year 2008.

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Deposits of group companies increased but subsidiaries companies’ decreases in year 2008 as you see above in balance sheet s heet for both years.

ADVANCES Advances are stated net of provision against non-performing advances. Specific and general provisions are made based on an appraisal of the loan portfolio that takes takes into into accoun accountt Pruden Prudentia tiall Regula Regulatio tions ns iss issued ued by SBP from from time time to time. time. Specific provisions are made where the repayment of identified loans is in doubt and reflect an estimate of the amount of loss expected. The general provision is for the inherent risk of losses which, although they have not been separately iden identi tifi fied ed,, are know known n from from expe experi rien ence ce to be pres presen entt in any loan loan port portfol folio io.. Provision made / reversed during the year is charged to the profit and loss account and accumulated provision is netted off against advances. Advances are written-off when there is no realistic prospect of recovery. When the Bank is the lessor lessor in a lease lease agreem agreement ent that transf transfers ers substa substanti ntiall ally y all of the risks and rewards incidental to ownership of an asset to the lessee, the agreement is presented within loss and advances.

Total net loans and advances increased by approximately 5% to PKR 125.60 billion from PKR 119.54 billion while deposit base was marginally reduced by 1.5% to PKR 174.5 billion compared to PKR 177.2 billion last year. The bank continues to maintain adequate liquidity. The advances to deposit ratio as at December 31, 2008 was 72%.

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INVESTMENT One of the greatest myths about investing is that it’s only for the very wealthy. The fact is that Mutual Funds have made it possible for anyone to invest, even if it is a small amount. It is not how much you invest, but how you invest that matters. The first step towards developing an investment plan is to understand your needs. How long can you afford to stay invested, how much money you need, how much risk you are comfortable with and what are your goals, are some questions that need to be addressed at the onset. With limited investment options and a booming but volatile stock market, what is good good for custom customer er hard earned income income is an impor importan tantt decisi decision. on. Standar Standard d Chartered Investment Services help with the decision, once again, a first such service to be offered by any Bank in Pakistan. Since 2004, Standard Chartered bank is the first bank to offer a diverse portfolio of investment options to its valued customers. Offerings are designed to provide customer with an opportunity to diversify his/her investments, minimize risk and maximize returns! Investment options can be categorized into: 1. Government Securities:

The These se are issu issued ed by Gove Govern rnme ment nt of Pakis Pakista tan n and incl includ ude e Spec Specia iall Savi Saving ngs s Certif Certifica icates tes (3 year year invest investmen ment) t) and Defens Defense e Savings Savings Certif Certifica icates tes (10 (10 year year investment) 2. Mutual Funds:

Standard Chartered Bank has partnered with the leading investment houses of Pakistan for distributing their mutual funds. Mutual Fund Basics A Mutual Fund is a pool of money that gives small investors access to a welldiversified portfolio of equities, bonds, and other securities. Each shareholder parti partici cipa pate tes s in the the gain gain or loss loss of the the fund fund.. Share Shares s are are issu issued ed and and can can be redeemed as needed (in the case of an open-ended fund). The fund's net asset value (NAV) is determined each day. Each mutual fund portfolio is invested to match the objective stated in its investment agenda. Equity Funds

An equity fund is one that is invested mainly in company equity through the stock exchange and is exposed to the risk of volatility associated with the

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equity market. Although this fund is the riskiest within the genre of mutual funds, it is also known to yield the maximum yields and dividends.

Fixed Income Funds

A Fixed Income Fund is one that invests in avenues which offer fixed returns over a set tenor. These funds are inherently linked to the general interest rate and are, therefore, unlike the stock market, safe from drastic fluctuation. The capi capital tal valu value e is more more easi easily ly su sust stai ainab nable le whil while e the the retu return rns s are are gene genera rall lly y modest modest.. Howeve However, r, active active fund fund manage managemen mentt can yield yield return returns s which which are higher than most fixed income avenues in the market and therefore, it is an attractive investment avenue for investors with moderate risk appetites. Money Market Funds

A Money Money Market Market Fund is one that invests invests in liquid, liquid, short-term avenues avenues which which offer fixed returns over short periods. These funds are inherently linked to the general interest rate and are, therefore, unlike the stock market, safe from drastic fluctuation. Underlying investment may include securities issued by corporate corporate bodies, bodies, spread transactions transactions,, reverse-repo reverse-repo transaction transactions, s, selective selective exposure in the CFS market, Term Finance Certificates (TFCs) and commercial paper. Balanced Funds

These funds maintain a mix within equity and fixed income markets. The inclin inclinati ation on of this this mix mix will will be dictat dictated ed by the fund’s strategic strategic intent intent and missio mission n statem statement ent.. This This fund fund offers offers more more maneuv maneuveri ering ng room room to its fund fund managers as they have the option to switch between market types i.e. fixed income avenues and capital markets. Effectively, the risk associated to this catego category ry lies lies somewh somewhere ere betwee between n that that of equity equity funds funds and fixed fixed income income funds and the returns also vacillate correspondingly between the ranges of the two.

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The Bank classifies its investments as follows: a)

Held for trading

These are securities, which are acquired with the intention to trade by taking advantage of short term market / interest rate movements and are carried at market value. The surplus / deficit arising as a result of revaluation at market value are taken to income. b) Held to maturity

These are securities with fixed or determinable payments and fixed maturity that are held with the intention and ability to hold to maturity. These are carried at amortised cost. c) Available for sale

These are investments that do not fall under the held for trading or held to maturity categories and are carried at market value. The surplus / deficit arising as a result of revaluation at market value is kept in a separate account below equity. d) Subsidiaries

Investments in subsidiaries are carried at amortised cost.

Investment by Segment

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BANKING INDUSTRY PROFILE : Pakistan Pakistan Banks’ Banks’ Ass Associ ociati ation on (PB (PBA) A) repres represent ents s the Pakista Pakistan n Bankin Banking g Indust Industry. ry. Established in 1953, its main objective is to coordinate the efforts of the banking industry, and to share a common vision of progress and development with its members. PBA Membership is institutionalized and is available only to the Banks operating in Pakistan. Currently there are 48 members, categorized into 6 groups (one of these groups is under formation). Its governing body is an Executive Committee (EC) comprising of 14 members, represented by the Chief Executives of the respective member institutions. PBA’s Principal Executive is the Chairman of the Executive Committee, elected periodically periodically from within the EC. Presently, PBA has 10 functi functiona onall Sub Commi Committe ttees, es, each each chaire chaired d by a member member of the Executive Executive Committee. Remaining members of the Sub Committees are relevant Executives of member banks. Find more about PBA and its governance in the PBA Profile Sect Sectio ion. n. Part Partic icul ulars ars of memb member ers s su such ch as thei theirr corp corpor orat ate e and and mana manage geme ment nt profil profiles, es, branch branch networ networks ks and financ financial ial statem statement ents s are availa available ble in the PBA Members Section. Over the years the role of PBA has broadened considerably. It is now referred to

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by the State Bank of Pakistan Pakistan in formul formulati ation on of regula regulatio tions ns for the bankin banking g industry, and has been entrusted with the function of regulating and monitoring certain services provided to the banking industry by outside service providers. These These servic service e provid providers ers includ include e ‘Profe ‘Professi ssiona onall Valuer Valuers’, s’, who are evaluat evaluators ors allowed to appraise the values of assets collateralized to banks, and Security Agencies Agencies offering security security services services to the Banking Industry. For details details visit the PBA Panels Section. Pakistan Banks’ Association was constituted as a Private Limited Company on 31st March 1953. Its controlling body is the Executive-Committee Executive-Committee,, which presently comprises of fourte fourteen en member members. s. Each Each membe memberr of the Execut Executive ive-Co -Commi mmitte ttee e is the Chief Chief Executive of a member Financial Institution. The Executive-Committee is elected by the PBA members for a period of one year. Now, the term of the Executive Committee runs from January 1 of the year to December 31 of that year. After appointment, the Executive-Committee members elect its Chairman and two Vice Chairmen. The Chairman of the Executive Committee is the Chairman of PBA. PBA Chairman is the Principal Executive of PBA.

The Executive Committee holds meetings on a regular basis to discuss, resolve, and execute the ongoing issues put up to PBA. These meetings are usually held once once a month, month, but depend depending ing on the requirem requirement ent,, they they are also held held more more frequently.

Being a Private Limited Company, PBA also holds Annual General Meetings, and, as per need, Extra Ordinary General Meetings to carry out business required to be done done ther therei ein n unde underr the the law, law, and and as requ requir ired ed by its its chart charter er (A (Art rtic icle les s of Association).

PBA has PBA has ten ten func functi tion onal al SubSub-Co Comm mmit itte tees es to hand handle le respe respect ctiv ive e issue issues. s. The The Chairma Chairman n of each each Sub-Co Sub-Commi mmitte ttee e is a membe memberr of the Execut Executive ive-Co -Commi mmitte ttee. e. These Sub-Committees include the following: •

PBA Sub-Committee for Accounting and Taxation

•

PBA Sub-Committee for Agricultural Finance

•

PBA Sub-Committee for Basel II, Corporate Governance & Compliance

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•

PBA Sub-Committee for Consumer Banking

•

PBA Sub-Committee for Credit & Prudential Regulations

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PBA Sub-Committee for General Banking, Operations & I.T.

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PBA Sub-Committee for H.R. & Training

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PBA Sub-Committee for Islamic Banking

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PBA Sub-Committee for SME / NBFIS

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PBA Sub-Committee for Treasury & Capital Markets

These Sub-Committees meet as and when required to deal with the issues faced by PBA on the particular aspects a spects concerning the Sub-Committees. PBA membership is open to the Financial Institutions operating in Pakistan. It currently has 48 members. The members are broadly categorized into following six groups: •

Nationalized Commercial Banks and Government Owned Banks

•

Privatized Banks

•

Development Financial Institutions

•

Small and Medium Enterprise (group under formation)

•

Private Banks

•

Foreign Banks

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FUTURE OUTLOOK A growin growing g and dynami dynamic c bankin banking g sector sector is essent essential ial for econom economic ic growth growth in Pakistan, as grow growth th in the the bank bankin ing g sect sector or and the the real real econ econom omy y mutu mutual ally ly reinforce each other. The banking sector constitutes the core of the financial sector in Pakistan. Private sector investment and consumption should be seen as the key drivers of the economy and must be supported by growing financial intermediation and services, including not only banks but also non-bank financial institutions, and debt securities and the stock market. The growth in banking system has been driven by rise in deposits to Rs4.1 tril trilli lion on and and advan advance ces s to Rs3. Rs3.3 3 tril trilli lion on.. Bank Banks s as prof profit itabl able e vent ventur ures es have have attracted close to over $4 billion of foreign direct investment during 2006-2008. Almo Almost st half half the the asse assets ts of bank banks s are are now now owne owned d by fore foreig ign n bank banks s that that are introducing introducing innovation innovation and technologi technological cal improveme improvements. nts. Recapitali Recapitalizatio zation n and prudent lending supported by strong regulatory and supervisory framework have lowered net non-performing loans to historical lows. In line with international trends, SBP introduced Basel II and banks have higher capital adequacy levels --well above the minimum level for the sector as a whole. Despite economic shock and stress in stock market, the banking system in the first quarter of the fiscal year 2009 has shown an increase in profitability of the banking system. Cent Centra rall bank bank’s ’s poli polici cies es,, regu regula lati tion ons s and and su supe perv rvis isio ion n sy syst stem ems s have have been been subst substant antia iall lly y tran transfo sform rmed ed and and barri barring ng one one area area (i.e (i.e.. nonc noncom ompl plia ianc nce e with with consol consolida idated ted superv supervisi ision on princi principle ples s progre progress ss on which which is also also underw underway) ay) SBP regulatory and supervisory framework is now in line with the international best practices and norms. Improved Improved managemen managementt brought brought high profitabil profitability, ity, record record low non-perform non-performing ing loans (NPLs) and capital adequacy levels well above regulatory requirements. Despite successful expansion in recent years, the banking sector continues to have have a larg large e pote potent ntia iall for for furt furthe herr grow growth th,, dive divers rsif ific icat atio ion n and and fina financ ncia iall strengthening. Deposit base rose to Rs 4.1 trillion and gross advances to Rs 3.3 trillion by September September 2008. 2008. Supported Supported by the growing growing financial financial intermedi intermediation ation process, banks’ aggregate profitability rose from Rs 63.3 billion in 2005 to Rs 73.3 billion by 2007 and Rs 46.0 billion for half year 2008. Recapitalization and prudent lend lendin ing g has lowe lowere red d banks’ banks’ net net non-p non-per erfo form rmin ing g loans loans (NPL (NPLs) s) to aroun around d 2.0 2.0 percent. Banks’ capitalization and quality of assets have helped raise the risk weight weighted ed capita capitall adequa adequacy cy ratio ratio to 12 12.1 .1 percen percent, t, well well above above the regula regulator tory y minimum of 8.0 percent.

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Agriculture lending has received a significant boost with the banking system meetin meeting g its target target of Rs 20 200 0 billi billion on set for 20 2007/ 07/200 2008. 8. This This notwit notwithst hstandi anding, ng, outstanding agriculture advances account for only 6% of total advances and the current flow of credit meets only 45% of the sector’s credit requirements. SBP’s strategy for agriculture credit seeks to double the number of borrowers from 2 million to 4 million and to meet 75-80% of the agriculture credit requirements within 3 to 5 years.

SBP has encouraged a revolving three-year credit scheme under which farmers can borrow for one year and and continue to borrow without provi rovid ding docu docume ment ntat atio ion n each each year. year. Guid Guidel elin ines es have have been been issue issued d for for lend lendin ing g to the the livestock, fisheries and horticulture subsectors and programs are being launched for the dairy sector. In addition, a Small farmer special financing scheme has been been prom promot oted ed base based d on grou group p base based d lend lendin ing g and a Crop Crop loan loan insu insuran rance ce scheme has been structured which is now being offered by some insurance companies. Agriculture credit based on Islamic principles will be promoted and capacity building provided to farmers and bankers in regional languages.

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Standard Chartered Bank

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