An exclusive interview with Dr. Asif A. Brohi, President, National Bank of Pakistan
While other banks merely function within their prescribed limits, National Bank of Pakistan (NBP) plays a more proactive and dynamic role in the life of the nation and ventures above and beyond its laid down parameters to function not just as a bank but as a national institution.
This is a concept that is well-enshrined in the stated vision of the Bank, namely, to be recognized as a leader and a brand that is synonymous with the people’s trust and respected for the highest standards of service quality, best business practices and demonstrated social responsibility. NBP today has over 16,000 employees and a branch network that comprises 1,304 locations in Pakistan and 28 overseas offices, along with representative offices in 4 countries. It is the country’s largest public sector commercial bank and counted among the world’s top 1,000 banks.
At the head of this illustrious banking institution is Dr. Asif A. Brohi, the Bank’s President and Chairman of the Board. A dynamic professional, Dr. Brohi is highly respected in financial circles, as well as among NBP employees, for his deep insights and proven ability to lead by example. No wonder, his proven track record notched up the NBP share price at the Karachi Stock Exchange by 6% within three days of his assuming charge as President of NBP. This was a sure reflection of the confidence that the investors repose in him as head of the country’s top commercial bank. Dr. Brohi has been associated with NBP for the past three decades and has played a very positive role in the long journey that has seen NBP becoming the country’s first commercial bank to cross the 1 trillion mark in total assets in 2010.
When Dr. Brohi assumed charge of the bank in January 2013, the national economy was in the throes of very challenging times. This can be gauged from the fact that Pakistan achieved moderate growth of around 3.7% in GDP in 2011-12 with the country facing a tough economic environment emanating from volatile security conditions, structural imbalances in the economy, an overarching energy crisis, a lower tax to GDP ratio and higher subsidies.
Even in such an adverse operating environment, with pressure on net interest margins and other contributing factors, NBP posted aftertax profits of Rs. 16.2 billion in 2012. Pre-tax return on equity stood at 20.5% and pre-tax return on assets at 2.0%. The bank’s capital adequacy ratio as of year-end December 2012 was at a healthy 16.5%.
The Bank’s total deposits increased by Rs. 110 billion or 12%, while advances increased by Rs. 132 billion or 25%. NBP has the largest Advances book in the banking industry of Pakistan. Increased focus on agriculture and retail portfolios resulted in these growth figures. Capital and reserves were at Rs.151.3 billion, higher by 14% from last year.
Dr. Brohi says that as part of NBP’s strategic plan the main priority areas of the Bank are financing for the energy and agriculture sectors, the advance salary scheme and consumer gold scheme – all designed to facilitate the masses. The focus is particularly on rural areas as people in this sector had previously been deprived of banking facilities. Consequently, people who never had access to finance, including those in urban areas, are now able to avail of these facilities. As a result, the Bank has recorded significant growth in terms of agriculture and consumer loans over the past couple of years and has the largest market share today in these categories amongst all commercial banks. A vital outcome of these initiatives undertaken by NBP is the positive contribution being made to the economy.
NBP has remained at the forefront of energy sector project financing in Pakistan. To date, NBP’s total exposure to the energy sector stands in excess of Rs. 160 Billion. The Bank has focused its financing efforts towards implementation of Wind and Hydel projects in the past two years. Such renewable energy projects shall remain a major priority for the Bank due to their positive contribution towards Pakistan’s energy mix and long-term sustainable electricity generation capacity. In the past 2 years, NBP has financed 3 wind power projects and is aiming to finance 3 more such projects in the near future. In addition to these, NBP has also financed hydelbased projects; these wind and hydel projects will contribute over 325 MW to the national grid. NBP continues to evaluate co-generation projects for industry, especially those that focus on the use of industrial waste and/or coal/biomass for electricity generation. This effort will reduce the industry’s reliance on the national power grid.
Dr. Brohi says NBP achieved great success on the agriculture front in terms of lending to farmers. The Bank disbursed Rs. 51 billion by way of agriculture credit in 2012-13 (July-May). He says that according to estimates the domestic agriculture sector requires loans worth Rs. 750 billion annually. While Rs. 300 billion is disbursed through formal banking channels, there is a gap of Rs. 450 billion which is filled by informal channels that charge very high markup rates to farmers. NBP is striving to fill this gap and its farming sector disbursements have seen a massive increase of 52% over the past 2 years.
Another star performer is the NBP Advance Salary product which represents a growing share in the Bank’s advances and profits portfolio. The Bank has further encouraged applicants by enhancing the maximum borrowing limit from Rs. 500,000 to Rs. 1 million. Interestingly, this has become the largest consumer product with the lowest rate of default while providing an excellent rate of return. Under the easy-installment scheme, government employees and employees of semi-government institutions / autonomous bodies
who receive their salaries through NBP are eligible to apply for loans. They can draw up to 20 times their take-home salary without paying any collateral.
Dr. Brohi says the other successful consumer product is the ‘Cash & Gold’ loan that people can acquire against their gold jewelry. The loan does not involve a minimum income requirement, has a one year roll-over period and is ideal for education, marriage, consumer and other domestic needs. In 2012 the Gold loans portfolio increased by 51%. Through these Gold loans NBP is also reaching out to the poor families of rural areas and by this not only is NBP undertaking a viable commercial proposition but is also extending a helping hand in the rural uplift of the nation.
Dr Asif Brohi views SME financing as an area of immense potential. This sector suffered during 2012 due to adverse external factors like negative impact of law & order situation, power shortages, high inflation & interest rates and reduction in export orders. However, even in these challenging times the Bank increased its SME portfolio by 8% in 2012. Going forward, the Bank is planning to identify region specific sectors and wooing back the quality old clients who have switched their business to other banks.
Furthermore, NBP has effectively kept its fresh investments in government securities at a minimal level and has instead focused on credit demand by public sector enterprises and the private sector. The Bank is planning to offset the impact of lower interest rates by expanding its advances in high-yield and low-risk products, lowcost deposit mobilization, branch expansion and reduction in nonperforming loans.
The NBP President specially mentions the manner in which the Bank has managed to sustain its role as a market leader during 2012 by providing corporate financial solutions. The Bank, he says, has built strong corporate relationships and with a strategy of ‘ better wallet sizing along with better focus on trade business’ for targeted growth, has shown considerable improvement in terms of loan growth (34%), trade (47%) and fee based income (45%), during the year.
While NBP already maintains the country’s second largest network of domestic branches, it aims at further expanding this network with an eye on serving new customers in more parts of the country and overseas. It is planning to establish 43 new branches across Pakistan in 2013, of which 36 would be regular banking branches and 7 Islamic banking branches, with special focus on rural areas. NBP is currently in the process of re-strengthening and re-branding its Islamic banking network to provide Sharia-compliant services to more customers. Internationally, NBP plans to expand its presence in Sri Lanka and is also undertaking a study to establish presence in India, Russia and United Arab Emirates.
The Bank plays a leading role in supporting the Government of Pakistan (GoP) in various ways. Presently NBP collects all types of taxes on behalf of the government through its entire network of domestic branches. The Bank is currently serving 7.7 million account holders which represent about 25 % of the total banking system accounts. The country has approximately 3 million pensioners of which 2.4 million (80%) are being served by NBP.
Dr. Brohi takes pride that NBP is one of the largest contributors to the national exchequer through direct taxes and dividends. The bank paid over Rs. 73 billon income tax during the last 5 years, while over Rs. 42 billion was contributed to the government as cash dividend during the same period.
For enhancing customer services a number of initiatives have been taken including direct credit of pensions, introduction of bio-metric system for withdrawal of pensions through ATMs, web based utility to facilitate customers for payment of various taxes and a 24/7 call center to address various queries / complaints of customers. Besides conventional branches, NBP has also opened 19 customer facilitation centers for collection of utility bills and payments to pensioners.
NBP has also maintained focus on increasing its Home Remittances business through which not only is the Bank facilitating its customers but is also contributing towards earning of much needed foreign exchange sent in by expatriates. NBP will soon be launching a tailor made deposit product specifically designed for families receiving periodic home remittances from abroad. NBP has posted phenomenal growth in home remittances in the last three years and is the recipient of “Max Factor Award of the Year” by Xpress Money Services which is the 3rd largest money service provider worldwide.
As far as IT capability is concerned, the Bank has successfully
converted its entire branch network to the ‘online’ platform in 2012. The Bank has embarked on an endeavor to implement Core Banking automation across all key areas of its business including Consumer, Corporate, Treasury, Trade, HR and Finance which shall enable the Bank to serve its customers better as well as bring efficiency across its attributed business functions. The target is to implement the core banking solution in 250 branches within the next year. NBP has increased its number of ATMs to 360+ in 2012 from 254 and plans to install 1,000 ATMs in the next 3 years.
NBP’s financial performance undoubtedly places it way ahead of the pack. But what brings it out head and shoulders above other banks is its unique service mix – its customers comprise the largest corporates to underprivileged rural farmers and individuals. NBP’s handling of government business posts confidence in the brand whereas its extensive rural franchise and overseas foot-print gives it the required reach for market penetration and increases cross sell potential. The Bank’s dedication to corporate social responsibility, to promoting education, alleviating poverty and serving national sports also makes it stand out as a truly national institution. Dr. Brohi is especially proud of the fact that NBP honors ethical values and respects society and communities in meeting their needs by catering to the development of future generations with pride and dignity. To this end, he leads the Bank with great confidence and takes initiatives that are sustainable and have a meaningful impact on society by connecting with the Bank’s business and core competencies.
While Dr. Brohi believes in facilitating the role of education as a vital ingredient for economic development, he ensures that the Bank lays equal emphasis on health, women development, child welfare, culture and timely relief to affectees of natural disasters. NBP has always stood firm in the nation’s hour of need, whether it was the devastating earthquake of 2005 or the floods and rains in the last three years. NBP and its employees have always been at the forefront in helping the affectees both financially and through volunteer work. Sports owe a lot to NBP which has actively patronized various disciplines over the years. Dr. Asif Brohi also takes special interest in NBP’s role in this direction and ensures that the Bank plays a proactive role in the management of its cricket team. To further enrich its role as a leading patron of sports, NBP sponsored some 55 events in Cricket, Hockey, Football, Squash, Badminton, Boxing, Soft Ball, Rugby, Snooker, Golf, etc., during 2012. Besides sports NBP believes in gender equality and women empowerment whereby women in the Bank’s workforce have always been given key posts and career advancement.
In terms of its future outlook, Dr. Brohi says NBP will focus on rationalization of manpower for improved utilization thereby improving the cost to income ratio, improving Current and Savings deposits ratio, increasing volumes, reduction of non-performing loans, further increase in lending to agriculture, SMEs and general consumers, concentration on trade business, further expansion of conventional and Islamic Banking branch networks, both at home and abroad, and improvement in IT infrastructure. All this should facilitate NBP in greatly increasing its revenues in the coming times.
Dr. Brohi says that as part of NBP’s strategic plan the main priority areas of the Bank are financing for the energy and agriculture sectors, the advance salary scheme and consumer gold scheme – all designed to facilitate the masses.
The NBP President believes in facilitating the role of education as a vital ingredient for economic development. He also ensures that the Bank lays equal emphasis on health, women development, child welfare, culture and timely relief to affectees of natural disasters.