Losses, loans crimp this Pakistan bank

State-controlled NBP has the highest costto-income ratio among country’s five largest lenders

On his first day as head of Pakistan’s secondbiggest bank, Saeed Ahmad visited the branch below his office in Karachi. It was 9:15am, past opening time, but the space was deserted.

Combating such “lethargy” is one of Ahmad’s priorities as he tries to turn around National Bank of Pakistan (NBP), which had lost its position as the country’s largest bank by assets and was suffering from bloated costs before he took over last year. From the outset, Ahmad saw fixing the bank’s culture as key to improving its bottom line.

“I was reluctant to come,” said Ahmad, who took over as National Bank’s chief executive officer in March 2017. “In my covering letter I did write what I’m going to do: I’m going to have town hall meetings, emphasise service quality, change the culture, attend to business.”

After spending his early months in the job disciplining wayward employees and fixing broken air-conditioners, Ahmad says he is now focused on addressing the bank’s poor profitability — culling lossmaking units and boosting lending margins.

One early priority was clamping down on belowmarket-rate loans and expensive deposits, which NBP would often resort to in order to meet year-end targets, Ahmad, 69, said in an interview at his office.

He also split the bank’s administrative regions into 37 from 23 to more closely oversee operations, which helped contain the increase in administration costs to 3 per cent last year from an average 9 per cent in previous years.

He now plans to close some two dozen loss-making branches and limit costs by boosting National Bank’s socalled CASA ratio, the proportion of deposits it gets from lower-cost current and savings accounts, from the high 40s at present to the industry average in the 60s. A targeted increase in loans to small and medium enterprises by at least 12 per cent annually for the next three years is also expected to improve margins.

But the cultural issues remain, as Ahmad found when he busted a racket of thieving branch managers last weekend.