Local & Global Banking: Slide 1

LOCAL & GLOBAL
BANKING
Slide 1
What we’ll cover…
Difference between a commercial bank and other financial

institutions.
Dimensions of commercial banking.
State Bank of Pakistan
ALM
Risk Management in Banking
E-banking
Islamic Banking
Pakistani and global banking
Case studies
Slide 2
2
Economy: Financial Sector
Who decides:
How much? Exchange
Value?
Who
Creates it ?
Liquid Money =
Currency + Deposits
Monetary sector ? Who manages money supply in a country?
Slide 3
Financial Markets
System where any kind of financial transaction can
take place by facilitating buyers and sellers
together.
Slide 4
Financial Intermediaries
Entities that facilitate transactions in the financial market.
They usually assume risk and are compensated by Fee in
the transaction
Slide 5
(a) LOCAL BANKING BUSINESS
OVERVIEW-An Outline
 Pakistan Banking Industry Analysis.
Changing colors of Pakistan‘s banking
industry and its challenges.
Competitive environment and SWOT
analysis.
IT in local banking business.
HR challenges in the banking industry.
Slide 6
Overview of State Bank of Pakistan
Functions of SBP
Slide 7
Primary Functions
of SBP
• Issue of Currency Secondary
Functions of SBP
• Management of
Monetary Policy
• Management of Non Traditional
FX Functions of SBP
• Supervision of
Financial • Promotion of
• Management of
Institutions Economic
Public Debt
Development
• Banker’s Bank
• Financial Adviser
• Banker to to Government • Promotion of
Federal/Provincial Islamic Banking
Government(s)
• Liason with
• Lender of Last Foreign • Trainings
Resort Institutions
Slide 8
LOCAL BANKING OVERVIEW
(I) PAKISTAN BANKING

INDUSTRY
Slide 9
Local Banking Overview
(I) PAKISTANI BANKING INDUSTRY

 Financial Soundness Indicators.
 Selected indicators of different Categories of
banks

Capital Adequacy

Assets composition

Earning & Profitability

Liquidity
Slide 10
(I) PAKISTAN BANKING INDUSTRY

Banks’ size is determined on the
following variables:

Assets

Deposits

Equity

Branches/outlets

Profitability (return on equity etc.)
Slide 11

Value of ATM Credit Card
Total Amt
online No. of transactions Outstanding
years branches ATMs (Million Rs) (Million Rs)
2004 2475 786 37502 14145
2005 3265 1217 46675 27099
2006 3947 1948 77656 39198
2007 4091 2174 88079 40576
Source: www.sbp.org.pk
Slide 12
Total Total
Deposit advances Total
years (Million Rs) (Million Rs) customer
2004 2219869.1 1542993.3 2201812
2005 2649573.6 1944080.4 2613464
2006 2967185.7 2363983.2 2926644
2007 3414270.6 2470902.1 3372551
Source: www.sbp.org.pk
Slide 13
Banking Sector Overview
90000
80000
70000
60000
50000 2005
40000 2006
30000 2007
20000
10000
0
online br ATM ATM transc crdit cards
Slide 14
Banking Sector Overview
3500000
3000000
2500000
2000000 2005
1500000 2006
2007
1000000
500000
0
deposits Advances Customers
Slide 15
ANALYSIS
GROUP WISE
COMPOSITION OF BANKS
Slide 16
GROUP WISE COMPOSITION OF BANKS

A. Public sector Commercial Banks 4
B. Local Private Banks 26
C. Foreign Banks 7
D. Specialized Banks 4
All Commercial Banks: A+B+C= 37
All Banks: A+B+C+D= 41
Hint: See details in your hand book
Slide 17
ANALYSIS
 Credit Rating of Banks and DFIs


Rating Agencies

Public Sector Commercial Banks.

Local Private Banks
Slide 18

ANALYSIS

Foreign Banks

Specialized Banks

Development Financial Institutions
(DFIs)

Microfinance Banks.
Slide 19
(II) CHANGING
COLORS OF PAKISTAN
BANKING INDUSTRY
AND ITS ANALYSIS
Slide 20
(II) CHANGING COLORS OF PAKISTAN
BANKING INDUSTRY
 Basel II Accord
 MCR Enhancement and Capital charge
under Basel II.
 Impact of Basel II implementation on
CAR of Pakistani Banking System.
Slide 21
Forces Affecting banking in Pakistan
Informal Economy Government
Forex Markets S.B.P

Industrial consumer Pakistani I.F.Is
Corporate Consumer Banking F.D.I
Industry
International Factors NBFCs
Low savings rate Basel-II
Technology Product Development
Local Foreign Banks

National Saving Centers
Slide 22
Forces Affecting Banking in Pakistan
(Potential Entrants)
NCBs, NonNCBs, PBs, & Foreign Banks
HBL
 State Bank of Pakistan
National Bank of Pakistan
GOP/Finance Ministry
United Bank Ltd.
Educational Institutions
First Women Bank Ltd Individual
 Computer/IT Industry Customers
Allied Bank of Pakistan
Petroleum Industry Corporate
MCB Bank Ltd.
 New s Agencies Customers
Newly established Pakistani
Insurance sector Private Banks (after 91)
Security Companies Foreign Pakistani Banks
Utilities (PTCL etc) Foreign Banks in Pakistan
Foreign Investment,National Savings Centers, DFIs, Investment Banks,

Cooperative societies, SMEDA, prize Bonds,Khushali Bank, Inami schemes,
Stock Exchanges, Hundi system, Home Saving Committees, Gold, Insurance
Slide 23
Schemes, Real Estate firms, Leasing/Hire Purchase firms /Modarabas
(III) COMPETITIVE
ENVOIRNMENT AND
SWOT ANALYSIS
Slide 24
(III) COMPETITIVE ENVOIRNMENT &
SWOT ANALYSIS
 Group wise Balance Sheets and Income

Statements of Banks.
Banks wise major statistics.

Loans and Advances

Total Assets
Slide 25

SWOT ANALYSIS

Deposits

Capital

P&L before and after tax
 Banks wise performance indicators:


Capital Adequacy Ratio

NPLs to loans
Slide 26

SWOT ANALYSIS

NPLs to loans (Net)

Return on Assets (ROA) after tax
Selected indicators for different categories of

Banks in terms of size
(Hint: see page 128, Annex-F for further details)
Slide 27
(IV) Information
Technology In Local
Banking
Slide 28
(IV) IT IN LOCAL BANKING BUSINESS

 Opportunities and challenges of Electronic
banking.
 E-Commerce--- an introduction.
Slide 29
(IV) IT IN LOCAL BANKING BUSINESS

 Reason for popularity

Convenience

Customer Demand

Accessibility & Availability

Competition

Profitability
Slide 30
FACILITIES OFFERED BY E-BANKING

Download
Statements
Online View &
access cancel
of account debit card
E-BANKING
Online
Internet
transfer
banking
of funds
Automatic Phone
bill payment banking
Slide 31
(IV) IT IN LOCAL BANKING

 OPPURTUNITES AND AVENUES

ATM

Credit Cards (Plastic Money)

Smart Cards

Mobile Wallet

Internet Banking

Online Shopping
Slide 32

Automated Clearing House (ACH)

Virtual Banks

Wireless Banking

Marketing.

Online Bill Payment
Slide 33

 THREATS/CHALLENGES

Non-Technological Challenges

Technical Challenges
Slide 34
 Non Technological Challenges


Regulatory challenges

Macroeconomic challenges

Jurisdictional /legal challenges
Slide 35


Marketing challenges

Privacy Law

Electronic Disclosure challenges

Management challenges
Slide 36

 Technological Challenges

Availability of technical expertise

Consumer training

In-House threats
Slide 37

DoS (Denial of Service) Attacks

New Virus attacks

Wireless network

Internet Frauds

Credit Cards frauds

ATM Cards frauds
Slide 38


Fake emails “Phishing”

PIN theft

Website Spoofing

Data integrity
Slide 39

 Steps taken by SBP for smooth
functioning & risk mitigation of E-Banking.
 Role of Credit Information Bureau in
Financial System.
 A Perspective on ECIB in Pakistan
Slide 40
(V) HR Challenges in
the Banking Industry
Slide 41
The Journey to HCM

Managers achieve results through people
From 1960s up to the mid-1980s term most
commonly used “Personnel Management”
Last 20 years HRM term gained popularity
Reflect changing focus of functionality
HRM stresses the development of people as
assets
Slide 42
Managerial Skills
 Conceptual skills
 The ability to analyze and diagnose a situation and
distinguish between cause and effect.
 Human skills
 The ability to understand, alter, lead, and control the
behavior of other individuals and groups.
 Technical skills
 The specific knowledge and techniques required to
perform an organizational role.
Slide 43
Skill Types Needed by
Managerial Level
Slide 44
Business Environment
Globalization (Pakistani banks
owned by MNCs)
Industrial economies
Transformation of the enterprise
Technology
Slide 45
Globalization
Management & control

Competition in world markets
 New threats to domestic business also
Global work groups & teams

Global delivery systems
Slide 46
Transformation
Knowledge-based economies and entities
Talent management
Enhanced Productivity
New products & services
Knowledge as an asset
Short product life cycle
Turbulent environment
360 degree performance appraisal
Rewards based on performance
Pay for performance culture
Slide 47
Transformation of Enterprise
Flattening
Against hierarchical fixed set of procedures
Decentralization OR Centralization in operations
Flexibility
Location independence
Selection of customers
Low transaction costs
Empowerment
Collaborative work
Slide 48
Technology in HCM
Modern technology impact
HRIS redefined
Processes and functions altered
Decentralization
Empowerment
Decision making
Information sharing
Physical barriers gone-total paperless environment
Slide 49
Human Capital Management

Human Capital Management includes all activities used
to attract & retain employees and to ensure they
perform at a high level in meeting organizational goals.
These activities are made up of:
1. Recruitment & selection.
2. Training and development.
3. Performance appraisal and feedback.
4. Pay and benefits.
5. Change management role.
Slide 50
GLOBAL BANKING
OVERVIEW
Slide 51
(b) GLOBAL BANKING OVERVIEW
 Globalization and WTO

Most Successful banks of the world
 Foreign Investment in Pakistan and its
impact on Pakistani banking industry
 GDRs issued by Pakistani banks in
foreign countries
 Leading financial markets of the world
Slide 52
(I) GLOBALIZATION &

WTO
Slide 53
Global Banking Overview
(I) GLOBALIZATION & WTO

 Brief history and background of WTO.
 Impact on Banking Industry

Banks performance and governance

Lending patterns

Financial stability

Capitalization
 Policy Issues
Slide 54
 WTO & PAKISTAN


Financial sector reforms in Pakistan---
Direct control to liberalization.

Impact of Financial reforms on
banking sector
Slide 55


Trade liberalization policy of Pakistan

Financial sector of Pakistan---present
scenario
Slide 56
Privatized Transaction of Banks (1991-2006)
Banks Share Sale price (Rs Date of transfer Buyer name
in million)
ABL 51% 971.6 Feb-91 EMG
MCB 75% 2420 April-91 National Group
Bankers Equity 51% 618.7 June-96 LTV Group

Ltd
Habib Credit & 70% 1633.9 July-97 Sh. Nahyan bin

Exchange Mubarik Al-
Nahyan
UBL 51% 12350 Oct-02 Consortium of

Bestway & Abu
Dhabi Group
Bank-Alfalah 620 Dec-02 Abu Dhabi Group
HBL
Slide 57
51% 22409 Dec-03 Agha Khan Fund
Privatized transaction of Banks
Mergers & Acquisitions

Banks Share Sale Price Date of Taken
(Rs in transfer over by
million)
Prime 93.4% 226.9 2006 ABN Ambro
commercial million $
Bank
Union Bank 96% 487 million 2006 SCB
$
PICIC - 342 million 2007 NIB

$
Arif Habib 90% - 2007 Rupali Bank
Slide 58
(IV) GLOBAL DEPOSITORY
CERTIFICATES (GDRs)
 A Global Depository Receipt (GDR) is a
certificate issued by a depository bank, which
purchases shares of foreign companies and
deposits it on the account.
 It is also defined as a transferable financial
security; depository receipts though traded on a
local stock exchange represent equities issued by
a foreign publicly listed company.
Slide 59
(IV) GLOBAL DEPOSITORY

CERTIFICATES (GDRs)
 How GDRs is created and traded
 GDRs advantages

Increasing liquidity

Borrowing on the global stage

Promoting mergers & acquisition
 Pros & Cons of GDRs
Slide 60
Capital Market Transactions
Banks share Sale Price Date of Buyer name
(Rs in transfer
million)
MCB 6.8% 563.2 Jan-01 MCB

employees PF
& Pension
Fund
NBP 37.3 million 373.0 Feb-02 Listing/Public
offer
MCB (CDC) - 664.0 Oct-02 General public

through stock
exchange
NBP 3.2% 604.0 Nov-03 -do-
UBL 4.2% 1087.2 Aug-05 -do-

Slide 61
(IV) GLOBAL DEPOSITORY CERTIFICATES

(GDRs)
 Issuance of GDRs by Pakistani Banks

MCB

UBL

NBP
Slide 62
(V) LEADING
FINANCIAL MARKETS
OF THE WORLD
Slide 63
(V) LEADING FINANCIAL MARKETS OF
THE WORLD
 What is financial market.
 Main characteristics of financial
markets
 Leading Financial markets of the world

American Stock Exchange (AMEX)

Tokyo Stock Exchange (TSE)

London Stock Exchange (LSE)
Slide 64
(V) LEADING FINANCIAL MARKETS OF
THE WORLD
 Divergent Trends-New Exchanges and
consolidations.
 Regional Exchanges and the Over-the-
Counter Market
 Analysis of the Exchange Markets
 Global Markets changes
Slide 65
 Reference websites:

www.sbp.org.pk

www.secp.gov.pk

www.hbl.com

www.pacra.com

www.ibp.gov.pk

www.imf.org.com
Slide 66

Local & Global Banking: Slide 1

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LOCAL & GLOBAL

Difference between a commercial bank and other financial

Monetary sector ? Who manages money supply in a country?

(I) PAKISTAN BANKING

(I) PAKISTANI BANKING INDUSTRY

(I) PAKISTAN BANKING INDUSTRY

(I) PAKISTAN BANKING INDUSTRY

2004 2475 786 37502 14145

2005 3265 1217 46675 27099

2006 3947 1948 77656 39198

2007 4091 2174 88079 40576

2004 2219869.1 1542993.3 2201812

2005 2649573.6 1944080.4 2613464

2006 2967185.7 2363983.2 2926644

2007 3414270.6 2470902.1 3372551

GROUP WISE COMPOSITION OF BANKS

B. Local Private Banks 26

All Commercial Banks: A+B+C= 37

All Banks: A+B+C+D= 41

Hint: See details in your hand book

 Credit Rating of Banks and DFIs

(I) PAKISTAN BANKING INDUSTRY

Forces Affecting banking in Pakistan

Informal Economy Government

Forex Markets S.B.P

Technology Product Development

Local Foreign Banks

Foreign Investment,National Savings Centers, DFIs, Investment Banks,

 Group wise Balance Sheets and Income

(III) COMPETITIVE ENVOIRNMENT &

 Banks wise performance indicators:

(III) COMPETITIVE ENVOIRNMENT &

Selected indicators for different categories of

(IV) IT IN LOCAL BANKING BUSINESS

(IV) IT IN LOCAL BANKING BUSINESS

FACILITIES OFFERED BY E-BANKING

(IV) IT IN LOCAL BANKING

(IV) IT IN LOCAL BANKING

(IV) IT IN LOCAL BANKING

(IV) IT IN LOCAL BANKING

 Non Technological Challenges

(IV) IT IN LOCAL BANKING

(IV) IT IN LOCAL BANKING

(IV) IT IN LOCAL BANKING

(IV) IT IN LOCAL BANKING

The Journey to HCM

Management & control

Global work groups & teams

Human Capital Management

 Globalization and WTO

(I) GLOBALIZATION &

(I) GLOBALIZATION & WTO

(I) GLOBALIZATION & WTO

 WTO & PAKISTAN

(I) GLOBALIZATION & WTO

ABL 51% 971.6 Feb-91 EMG

MCB 75% 2420 April-91 National Group

Bankers Equity 51% 618.7 June-96 LTV Group

Habib Credit & 70% 1633.9 July-97 Sh. Nahyan bin

UBL 51% 12350 Oct-02 Consortium of

Mergers & Acquisitions

PICIC - 342 million 2007 NIB

Arif Habib 90% - 2007 Rupali Bank