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Best domestic bank: HBL
|Muhammad Aurangzeb, HBL|
After a miserable year in 2017, Pakistan’s biggest bank bounced back in 2018 to become, well, bigger still.
HBL took a hit to its bottom line and its reputation when the New York bank authorities fined it $225 million in 2017 for a decade of compliance breaches.
With a new chief executive, ex-JPMorgan alumnus Muhammad Aurangzeb, at the helm to replace Nauman Dar, who left in the wake of the New York trouble, HBL rebounded to report annual profit after tax of PRs12.4 billion ($90 million) for the 2018 calendar year, up 41% from 2017.
HBL said it achieved that number despite what it described as “an ever-evolving landscape of regulatory changes.” That’s a reference to the new broom Aurangzeb has swept through the country’s oldest bank, which was founded before Pakistan became a nation.
Returning to Pakistan after 18 years abroad with JPMorgan and ABN Amro, Aurangzeb vowed to institute the world’s best standards in compliance, which he says is simply sound business practice.
So far, he says, customers seem happy to join him on that journey. Deposits grew 7% in 2018, despite Pakistan’s grim economic environment and a change of government. This year, HBL made PRs1 trillion in advances for the first time; another benchmark, having received double that in annual deposits in 2015 – the first Pakistani bank to achieve both levels. That speaks to how dominant HBL is in Pakistan; 11 million customers accessing 1,700 branches for a market share of 15%.
If Imran Khan’s new government delivers even half what it promises, Aurangzeb says HBL is poised to soar even higher – and put the New York setback well behind it.
Best corporate and investment bank: HBL
In a faltering economy, HBL’s corporate and investment banking business managed to stand tall in 2018.
The commercial banking side experienced record growth, as its lending book expanded 21% in 2018 against the previous calendar year. At the end of 2018, HBL’s lending book was tracking at a record high of PRs63.8 billion ($460 million).
With a large number of China-devoted desks at the head office in Karachi, the capital Islamabad, and uniquely for a foreign bank, in China’s western metropolis Urumqi, HBL has positioned itself for a bonanza from the massive China-Pakistan Economic Corridor (CPEC) infrastructure programme. HBL’s investment banking business, run by Farhan Talib, says it closed 10 transactions, worth a total of over $3.5 billion, between September 2017 and September 2018.
Notable deals by the bank included advising Pakistan’s first private-sector transmission line project; this is the CPEC-related, 878-kilometre circuit that is delivering power to Lahore, Pakistan’s second-biggest city, and is a $1.7 billion project backed by the world’s largest utility, China’s State Grid Corporation.
Another big CPEC deal advised by HBL was the $520 million Thar Energy coal station in provincial Sindh, in Pakistan’s south. As of November 2018, HBL has managed $6 billion worth of CPEC business, and that number looks set to rise.
In November, HBL tied up with China’s largest investment bank, China International Capital Corporation Limited (CICC), to jointly provide investment banking services to Pakistan and Chinese companies.
Best international bank: Standard Chartered
|Shazad Dada, Standard Chartered|
In Pakistan, when it comes to international banks, there is Standard Chartered – and then there’s daylight. Shazad Dada’s outfit has been in the country since 1863, and has recently seen off StanChart’s traditional competitors in the south Asia region, notably HSBC and Citibank (the latter the alma mater of so many Pakistani bankers).
Chinese state-owned banks have appeared in the market of late, as Beijing and Islamabad ratchet up their love affair over the $50 billion China–Pakistan Economic Corridor project, but these new faces have yet to challenge StanChart.
In calendar 2018, and in the face of an increasingly grim economy, StanChart’s Pakistan operation produced its highest-ever pre-tax profit – up 37% to PRs18.5 billion ($133 million) from the previous year. Overall revenue growth was 12%, the bank says, and client revenue jumped by 13% with strong contributions from transaction banking, financial markets and retail deposits. It helped that Dada kept a check on expenses, which rose 5% during the year.
Another milestone was achieved when the bank’s total deposits exceeded PRs400 billion ($2.9 billion), up 13% across the bank’s 77 branches in 11 cities.
StanChart is one of the go-to banks at the top end of town. Some 54% of the companies that comprise the Pakistan Stock Exchange’s PSX-100 index use StanChart for their payroll requirements, and 76% of them use the bank’s corporate division.
Best for premium banking services: Standard Chartered
In a country where the wealthy have always preferred to have their cash offshore – in Dubai, Singapore or London – Standard Chartered pioneered domestic wealth management in an effort to keep it at home. And that’s been a good strategy for a London-based bank that, by dint of its colonial heritage, operates with a local mandate in Pakistan, allowing local access with perceived international solidity.
It’s been a good year for StanChart’s Priority Banking operation, as the bank claims it has increased its priority-qualified clients by over 70% during the period while assets grew 74%. Deposits were 30% higher year on year in calendar 2018, and revenues grew 16%.
With a new government in Islamabad now frowning on capital flight and urging Pakistanis abroad and at home to invest in the motherland, the good times look set to continue for Shazad Dada’s team.
Best digital bank: Telenor Microfinance Bank
Best for microfinance: Telenor Microfinance Bank
|Shahid Mustafa, Telenor Microfinance Bank|
The central State Bank of Pakistan calculated that branchless banking in Pakistan grew roughly 10% in the three months to the end of September 2018, the most recent period reviewed, with a total of 43.1 million accounts.
Some 2.5 million transactions are conducted daily through mobile devices. Similar growth was observed in branchless banking deposits during the quarter: these rose 8% to reach PRs16.5 billion ($118 million).
In Pakistan, the lion’s share of that expanding market belongs to Telenor Microfinance and its digital arm, easypaisa. Indeed, digital and microfinance have tended to go together in Pakistan ever since Norwegian telecom firm Telenor took full control of microfinance pioneer Tameer in 2016.
Leveraging Telenor’s status as one of Pakistan’s biggest mobile phone carriers, easypaisa reaches the parts of Pakistan that the big banks in Karachi can’t or won’t get to, offering the unbanked a portfolio of financial services: payments, e-wallet savings, transfers, even rudimentary insurance. As many as half of those daily transactions are made through the easypaisa platform.
And Telenor Microfinance promises to be even more ubiquitous: in November, the Pakistani authorities approved the acquisition by China’s Alibaba of a 45% shareholding in the bank for $184.5 million. The Chinese are expected to channel their Alipay platform through the Telenor network, reaching beyond the poor who use Telenor for microfinance to the massive so-called ‘sandwich layer’ with semi-formal financial arrangements, believed to number up to 100 million in Pakistan.
Telenor Microfinance will push on without its popular chief executive, Shahid Mustafa, who stepped down in February: at the time of going to press, his permanent successor had not yet been appointed.
Best bank for SMEs: JS Bank
|Basir Shamsie, JS Bank|
Four years since JS Bank relaunched its SME business, the strategy is paying off. While the small and medium-sized enterprise business at much bigger rival HBL might be larger, JS Bank’s SME division is now ranked the third largest in the country and is attracting attention – and compliments – from competitors for the rapid emergence of its shrewd relationship-centred operations.
Chief executive Basir Shamsie measures JS Bank’s SME portfolio at PRs47 billion ($340 million) as of the end of 2018, up a stunning 155% in the last year.
It claims a “revolutionary” partnership-driven model that results in one of the lowest non-performing loan ratios in the Pakistani SME sector of less than 2%. With increased focus by the new Imran Khan government on financial inclusion, one interesting initiative by JS Bank was to tie up with foreign aid-funded investor and incubator Karandaaz (‘entrepreneur’ in Urdu). Not-for-profit Karandaaz is funded by the UK government’s aid programme and the Gates Foundation, and has joined with JS and its national network to provide easier access to funding for SMEs.
JS Bank has also partnered with Washington’s USAid to drive SME funding.
Best bank for CSR: HBL
HBL is controlled by the philanthropic foundation of the Aga Khan, the billionaire spiritual leader of the Ismaili branch of Shia Islam: so not surprisingly, corporate and social responsibility is considered part of the bank’s DNA.
The bank is mandated to contribute 1% of its annual taxed profit to the HBL Foundation, which was established in 2009 to promote the development and well-being of the underprivileged in Pakistan, one of the world’s poorest countries.
HBL’s new chief executive, Muhammad Aurangzeb, told Asiamoney that the philanthropic side is very important to him; as an Aga Khan-funded scholar to an Ivy League American college (Wharton), he feels compelled to give back to society. In 2018, HBL donated PRs128 million ($920,000) to the foundation and other direct causes, focussing on health and education.
For example, 29 doctors at Karachi’s Indus Hospital undertook emergency training, and are now providing free health care to the public.
The bank financed free eye surgical camps set up by the Marie Adelaide Leprosy Center in the remote Baluchistan and Gilgit-Baltistan regions, serving 15,000 patients.
HBL also partnered with a range of hospitals and clinics serving the poor, and urged staff to become blood donors.
In education, HBL financed skills development in collaborations with the influential Helping Hands Welfare Association and various national charities. HBL support has also financed a new museum for the Citizens Archive of Pakistan in an underprivileged area of Lahore.