Habib Bank AG Zurich (HBZ) was established in Switzerland in 1967; in 2012, The Banker Magazine ranked it as the 5th most sound bank in Switzerland and 152nd most sound bank in the world. The Group initiated its UK operations in 1974 and currently operates through 12 branches.
HabibMetro has been assigned premium long-term and short-term ratings of “AA+” (Double A plus) and “A1+” (A one plus by the Pakistan Credit Rating Agency (PACRA) for the 13th consecutive year. These ratings, being the highest among the local sector Private Banks, denote a very low expectation of credit risk emanating from a strong capacity for timely payment of financial commitments. HabibMetro has also been nominated by the IFC as the “Most active bank supporting South & SME trade in Middle East & North Africa region”.
Since its inception in 1992, HabibMetro Bank has maintained its business focus on trade finance and now handles a significant quantum of Pakistan’s trade business. In Pakistan’s banking sector trade finance niche – where HabibMetro continues to increase its market share - the Bank is known for its enduring relationships with clients and its customer-oriented business outlook.
Through an elaborate active network of over 500 correspondents, HabibMetro conducts trade services through: LC advising, negotiations, confirmations, documentary collection services, export bills discounting, risk participation with correspondent banks and multilateral trade agencies, letter of guarantees / standby LC services, drawing arrangements and local currency clearing services, foreign currency placements with correspondent banks, structured trade products and structured payment products.
With interest rates in Pakistan back on an upward trajectory, Pakistani banks are looking forward to posting higher top lines in the near future. While in conversation with him, Aziz remarked that he expects the Pakistani banking sector to ‘strategize towards core advances’. ‘Banks cannot sustain their books solely on government securities,’ said Aziz.
As per the CEO, due to an anticipated increase in economic activity, the trade-oriented bank’s lending is expected to witness an increase against a trade-off with investments and government securities.
When asked about HabibMetro’s portfolio of advances and exposure on the Pakistani textile sector, Aziz stated, ‘The textile sector has been under considerable pressure for several years and resultantly banks have reduced our exposure to the textile industry. We are a trade finance bank and therefore have extended sizeable short-term trade related credit to the textile industry. However, we have been mindful of the segments of the industry that we finance i.e. whether it is cotton yarn, spinning, weaving, made-ups, garments or high-end. We make distinct credit decisions based on the textile segment in question. Credit discipline is one of the primary reasons behind HabibMetro’s sound asset quality.’
‘GSP plus status will give us a great advantage in the next 2-3 years. In the recent past, we have experienced setbacks in home textiles and garments segments, particularly in the EU. We are positive that we will regain the ground there now. Factories, and textile units, are going through balancing, modernization and replacement programs. We are in a good position to take advantage of the GSP Plus,’ said Aziz.
Addressing the sluggish flow of local private sector credit Mr. Aziz elaborated, ‘Financial institutions are not averse to lending. However, in the recent past, the market has experienced a paucity of lending avenues, due to which banks turn to the marketplace and find the government as a viable lending option. This lack of opportunities has primarily emanated from energy issues and security concerns. Once these are addressed, financial institutions will be more comfortable lending money to the private sector upon the sole consideration of sound credit practice.’
In an insightful explanation, Aziz says that project financing cannot be based on debt alone - there has to be a fair balance between debt and equity - and that equity comes in from private entrepreneurs who gauge investment within the country to be a safe undertaking. Hence, Pakistan’s economic policy has to be strengthened and implemented properly for private investment to be encouraged and for bankers to find it feasible to extend funding for projects.
In the last quarter of 2013, private sector credit saw an augmentation after a long period of stagnation. Going forward in 2014, with some of the energy issues resolved already and a clear-cut internal security policy having been announced recently, the local banking sector is poised to witness further growth in private lending.
Having concentrated upon the business metropolises in the Southern region of Pakistan, heretofore, HabibMetro Bank is now extending its geographic outreach organically and intends to penetrate areas in the Northern region of Pakistan, too. In doing so, the Bank aims to accelerate deposit mobilization and capitalize upon trade business linkage.
Mr. Sirajuddin Aziz, President & CEO of HabibMetro Bank explained, ‘Previously, we used to have one leg of transactions, the one in the business metropolis of Karachi, where we are more predominant. The supplier leg or the buyer leg in the Northern region remained untapped because of the lack of our presence there. With our enhanced outreach, penetration in the Northern areas and ensuing transactional integration, we are now able to tie up transactions within the Bank. This leads to greater cost efficacy and operational efficiency.’
Aziz is a determined leader who believes in continuous development and growth for the sake of improved customer service. ‘HabibMetro’s focus is: organic growth through network enhancement. We expect this to translate into higher deposits, increased transaction banking business and more valuable trade linkages. We have enhanced our product suite during the year 2013, and intend to increase our Islamic banking market share,’ said Aziz, before adding, ‘In addition to the pursuit for collection of low cost resources, internal developments and evolvements also rank high in our 3 year strategic plan.’
Aziz is optimistic about Pakistan’s economic prospects, ‘Economic and socio-political opportunities will stem from the corridor with China, and gas pipelines. Once Afghanistan is more settled politically, there will be a significant quantum of trade coming into Pakistan with Pakistan being the conduit for the central Asian republics. The country enjoys a very strategic location in the world, and this will be crucial for its development. For example, shipping something out of Qingdao and Shanghai to Africa is quite expensive, whereas from Karachi the cost would reduce dramatically. Hence, a lot of economic opportunities are on the horizon and we can expect great things from Pakistan in the near future,’ he concluded.
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