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The domestic banks have engaged more than 40,000 employees during the past two years that showed the momentum of growth and expansion in the financial sector in 2005 and 2006. In 2004 the number of employees of all the scheduled banks stood at 89,932, which has increased to 130,848 by December 2006. Although the data of banks employment for January-June 2007 is not yet available, but banking circles claim that by including the data of employment in first six months of this calendar year, the banks have offered more than 55,000 thousand jobs from 2005 to June 2007. United Bank Limited, MCB Bank, Bank Alfalah, Askari Commercial Bank, Allied Bank of Pakistan, National Bank of Pakistan, Bank Al-Habib and NIB Bank have offered most of the jobs.
The UBL has given the highest number of jobs and engaged 6082 bankers in last two years and its strength of staff stands at 15,369 by December 2006, from 9,287 in 2004. MCB Bank offered 5,041 jobs in 2005 and 2006. The total number of MCB Bank employees amounted to 14,930 by December. Bank Al-Falah has engaged 4,691 bankers during the said period and it ranked three in providing jobs in last two years. BAF staff’s total strength had increased to 8,079 in 2006 from 3,388 in 2004.
The strength of Askari Commercial Bank Limited staff has increased to 5,226 from 2118 during the said period that shows an increase of 2,118 in its number of employees in last two years. Allied Bank has provided 2,112 jobs in two years as the strength of its employees has edged up to 8,879 in 2006 as against 6,768 in 2004.
National Bank of Pakistan has provided 1,611 jobs and the number of staff’s strength has increased to 15,356, from 13,745 during the period under review. Similarly, Bank Al-Habib has provided 1,434 jobs in 2005 and 2006; NIB Bank offered 1,229 jobs; Prime Bank gave 1,188 jobs while Saudi-Pak Commercial Bank engaged 722 employees in last two years. The actual data of hiring of staff by the Standard Chartered Bank Pakistan is not available due to the acquisition of the Union Bank by the SCBP.
Meanwhile, according to Banking System Review 2006 of the SBP, the future growth projections of the economy suggest that the current growth momentum in the banking system may prevail in the near future. The deposits are expected to maintain their previous growth trend on the back of steady flow of workers’ remittances and substantial foreign exchange inflows in the form of FDI. Loans may follow growth trends of major sectors of the economy and would heavily depend upon the demands of both the corporate and consumer sectors and also the movements in interest rates. The demand from SMEs and agriculture segments of the economy, which presently have great potential, would also pave the trend in the loans growth. Some supply side factors like the banks’ internal limits to a borrower; concentration of exposures etc. may constrain significant expansion with the existing base.
This can have an important bearing on the asset mix, which may experience a shift more towards investments, not only because of the expected slow down in loans demand in near future but also due to the increasing borrowing needs of Govt. this year. This, in turn, may put some pressure on net interest margins of the banks. However, the promising growth in deposits and the increasing capital base may encourage banks to increase their business volumes in their core business activity in order to maintain the trends in their profits and ROE.
The profits would mainly depend upon the volume of core business activity, hence the level of NIM as well as the quality of the existing portfolio. Particularly, the trends in the quality of consumer loans, due to its risky nature, may have a significant bearing on the existing quality of assets portfolio. On capital front, since the banks would further need to increase the capital base in order to meet the Rs4 billion requirements by the end of CY07, the strengthening of solvency profile of the banking system is expected to continue for this year too. The higher loan growth during the last few years, which has also resulted into outstanding performance of the banking system, may have become a concern as well as a challenging target.
On one hand, the aggressive loan growth has started to take its toll in the form of some deterioration in the asset quality of commercial banks, thus raising a concern both for the regulator and banks. On the other hand, the maintenance of the growth trends would become a challenge for the banks in their quest of maintaining the ROE, especially when the capital base is also increasing. Striking a balance on this trade off will continue to pose a challenge for the banking system in CY07 and in future as well. Tapping into new and less risky areas, broadening the base of the credible borrowers, adoption of strict standards of monitoring and internal control and lifting up of the corporate governance standards may help achieve a good balance between the better yields and contained credit risk.
Capital position of the banks is expected to further fortify given the enhanced MCR for the next couple of years and sustained earnings support. Growing mergers and consolidation, which have greatly shaped our banking system during the last few years, are expected to further consolidate and hence contribute towards the stability of the banking system. Besides weeding out the smaller banks, these have helped in increasing the healthy competition, improving the governance standards promote efficiency and productivity.
Going forward, the implementation of Basel II would be a great challenge both for the regulator and the banks. Basel II is not only aimed to strengthen the risk management standards but also help the banks to align their risk with the capital. In line with the roadmap, the parallel run has started in July 06. Initially, since the banks are to go on standardised approach, the impact on CAR and hence the regulatory capital under this approach is expected to be relatively low. Total risk weighted assets may experience some increase due to the inclusion of operational risk charge, whereas, the credit risk weighted assets are expected to decrease with the share of good rated borrowers of the banks. On overall basis, the CAR under Basel-II may experience shedding of a few basis points; however, the existing level of CAR of the banking system can easily sustain such a small dip. While the banking system has been performing well for quite a few years and has been reaping the benefits of increased financial soundness, improved resilience, enhanced competition, increased efficiencies, growing penetration and hence widening the outreach, it has, nevertheless, become imperative that it can sustain these gains and also build on.
This calls for the need of a focused approach on number of fronts. Converging on the effective risk management, improved corporate governance standards, and focusing on the quality of assets and the earnings should fortify financial soundness. Courtesy by “The Nation”Meezan Bank has the largest variety of Shariah compliant products and services under one roof. Their broad product menu offers complete range of Islamic banking products and services, including Commercial Banking: working capital finance, import & export, guarantees, Islamic export refinance and long term financing. In Retail Banking it offers a complete range of current and savings accounts, term deposits, and foreign currency accounts. In consumer finance, there are Auto and Housing finance products available. In addition, the Bank provides state of the art 24/7 Banking services to all its customers, which includes ATM Outlets, ATM/Debit Card, Internet Banking and CallCenter.
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