Large, well-established, capital-rich banks are ideally suited for riding out periods of economic turbulence and sagging markets, but a safe haven from the storm is usually as far as it takes them. Those same tempestuous conditions can spell opportunity for smaller, more nimble institutions ever on the lookout for chances to grow their business in return for assuming and managing the added risk. That is the dynamic that drives some of Pakistan’s most innovative medium-size financial service performers, and it is particularly true of NIB Bank
In fact, recent trends in the Pakistani financial sector show robust growth in mid-sized banks’ deposit bases, thus signalling a growing degree of both customer trust in these banks and their competitiveness in terms of resource mobilisation and provision of efficient services. As such, mid-sized banks find themselves well positioned to spur private sector growth.
“The challenge for the banking sector is to see the economy revive. As you can see, in the last few years, growth in the private sector could have been faster. The banks are keen for an opportunity to be a part of the change and the shift in the economy,” says Badar Kazmi, NIB’s President and CEO.
After the bank came under new management in 2012, it returned to profitability, posting unconsolidated after-tax profits of PKR 38 million (£217,000), boosting revenues by 25 per cent while holding expense growth to 10 per cent.
For the first half of 2013, the bank has announced revenue of PRK 2.96 billion, representing a 21 per cent rise over the same period a year earlier. Singapore-based Temasek Holdings has the controlling interest in NIB, making it one of Pakistan’s largest foreign-owned banks. Its 450,000 customers are served from 179 branch offices in 59 cities, remarkable in a country where almost 90 per cent of the population cannot or does not make use of banks for everyday financial transactions.
“The banking sector is very robust and it has resisted a lot of stresses both internally and externally, and that’s a very big testament to the fact that the sector has the capacity and depth to move on”
Badar Kazmi, President and CEO of NIB
“Per capita penetration of the banking sector is very low so I think that suggests a huge opportunity for banks to grow into,” comments Mr Khan, a prominent banking executive.
“Pakistan has the potential for a green revolution, and by that I mean the capacity to produce large amounts of farm produce to support not only our own growing population but also for regional markets. Unfortunately, as banks we have not focused on those areas, as economic strategy we have not focused on that area, and I think we need to really think of expanding it, corporatising it and taking it to the next level,” he adds.
At NIB, Mr Kazmi is clear as to the direction in which he wants the institution to evolve. “We have defined our goals in terms of where we want to go and what we want to do. So in the consumer banking sector, we are looking to gain market share. In the wholesale banking sector we want to be involved in all big transactions with customers that matter to us; so, we want to be seen as an important bank for our customers who may have other banks, but we would like to be in their top three to five banks.”
The mechanisms needed to accomplish those goals are already in place. “We have invested, and continue to do so, in technology,” says Mr Kazmi. “We felt that we needed a robust payments mechanism and also realised that, instead of creating a whole infrastructure ourselves, why not work with those who are best in the industry. Therefore we have gone into a partnership with MasterCard. We launched the first chip-based debit MasterCard and we think that with the sort of technology they have, we can leverage it to other areas like mobile banking.”
Both executives agree that the future of banking in Pakistan is Islamic. “I see a greater opportunity in Islamic banking within the context of Pakistan and more importantly as a new capital opportunity for new investors,” says Mr Khan.
NIB Bank is one of only 16 institutions the Pakistani government has certified as Sharia compliant. But Mr Kazmi insists this is not going to transform the way his bank has done business, and sees its Islamic services evolving as a division or subsidiary of conventional banking.
“We want to be a port of call for customers looking for Islamic solutions so they don’t have to go to the dedicated Islamic banks. Our first priority is that our existing customers’ requirements are being met through the provision of Islamic products. Our second priority would be more about how we extend our franchise strategically with a robust Islamic banking proposition.
“The banking sector is very robust and has resisted a lot of stresses on both the internal and external fronts. That’s a very big testament to the fact that it has the capacity and depth to move on,” says Mr Kazmi.