NIB Bank

The Bank was incorporated in Pakistan and listed on all the three stock exchanges of Pakistan and has 178 branches. The Bank is a scheduled commercial bank and is principally engaged in the business of banking as defined in the Banking Companies Ordinance, 1962. The bank is a subsidiary of Bugis Investment (Mauritius) Pte Limited which is a wholly own subsidiary of Fullerton Financial Holdings Pte Limited which in turn is a wholly owned subsidiary of Temasek Holdings, an investment arm of the Government of Singapore.

Effectiveness, Efficiency, Responsiveness and Innovativeness analysis Measure bank Efficiency:
Drucker (1977) distinguished efficiency and effectiveness by associating efficiency to “doing things right” and effectiveness to “doing the right things.” In his terminology, a measure of efficiency assesses the ability of an organization to attain the output(s) with the minimum level of inputs. Kumar and Gulati (2009) appraise the efficiency, effectiveness, and performance of public sector banks operating in India by using a two-stage performance evaluation model efficiency and effectiveness. I have used the same methodology to measure the efficiency of NIB bank and its major competitors. Kumar and Gulati (2009) used the following variables as the output. 1. Advances 2. Other Earning assets Inputs used for computing efficiency scores are: 1. Total customer deposits and borrowings 2. Total number of employees 3. Total Fixed assets The financial data for the study was mined from the banks’ financial statements existing on state bank of Pakistan website. The study also provides the comparative analysis with major competitors of banking industry in Pakistan. The competitors have been selected on the basis of higher market price. Market price for the shares of MCB and HBL is Rs.177 and 112 respectively.

795 154.031 MCB 13.752.38% MCB 98.596.714. There are overall about 200 branches in Pakistan which is minor figure as compared to competitors.689.222 HBL 416.259 319. After calculating the efficiency ratio NIB bank is not enough efficient in utilizing its resources as compared to its competitors.Bank Input No of Employees Deposits Borrowings Total fixed assets Total Inputs NIB bank 2.380 65.627 22.188. We hardly see an ad of NIB bank on T.904 17.007.107. NIB bank needs to advertise heavily to attract the customers.261.903 593.V and print media. There are total 35 branches of NIB bank in Lahore while MCB and HBL have 80 and 105 respectively. In Islamabad there are total 11 branches of NIB bank. The reason for the low deposits is poor branch distribution.488.562.e. borrowings.693.768.958 MCB 225.100.226 HBL 13.40% Analysis and Recommendations: The bank efficiency score tells how well a bank uses its inputs i. Another reason for low deposit is the poor advertisement.671 85.696 Bank Efficiency Scores Bank Efficiency Scores NIB Bank 93.382.419.844.389 476. By analyzing all the inputs and outputs and their Efficiency scores some recommendations are given under:  NIB bank needs to efficiently utilize all of its input.710 39.263 2.661 875.801.380 491.767. In Karachi total 55 branches are working while HBL and MCB have 92and respectively.887.307 892.506.268 47.80% HBL 96. Whereas MCB has 22 branches i and HBL have 42.308. Lack of advertisement has created the unawareness among the people regarding the bank and people are depositing their amounts to the competitors. its human resource and fixed assets to generate earnings assets of the bank.649 Bank Output Customer loans Other Earning assets Total Output NIB Bank 60.578 126.963 545. customer deposits.597 33. The reason for the inefficiency that the NIB bank is not offering enough loans to its customers because of low deposits.022 995.  .

896 126. PUBLIC RELATIONS 2. 2007).861 Effectiveness score NIB Bank 3.34% MCB 9.112.963 HBL 416.078.689.389 476.. An organization is effective to the degree to which it achieves its goals (Asmild et al.526.46 HBL 56.398. it is essential to describe the objectives of banks.887.259 319. Intense competition in the banking sector has forced the banks to reduce all the input costs to the minimum and to earn maximum incomes from traditional and non-traditional activities with fewer inputs.506.65% HBL 7. Net margin to Earning assets Net margin Earning assets Net Margin to earning assets Loan to deposit NIB Bank 2.64% 0.596.696 6.526.307 Output Net-interest income Non-interest income NIB Bank 2. the input variables in measuring effectiveness includes: advances and other earning assets. Accordingly. Input advances Other earning assets NIB Bank 60.314 8.71 MCB 44.578 MCB 225.958 1.078.380 65.314 545.152.801. For computing the effectiveness scores for banks. (2006) observed that a measure of effectiveness assesses the ability of an organization to attain its pre-determined goals and objectives.I have selected: netinterest income and non-interest income as the output variables in measuring the bank effectiveness.203 14.32% 0.782.97% Effectiveness Score .398.48 Bank Effectiveness: Keh et al.261.191 HBL 56.767.896 2.203 892.16% 0.080 MCB 44.222 8. The performance evaluation model as developed by Ho and Zhu (2004) takes the output variables of measuring efficiency as the input variables in the measuring effectiveness.844.752.

Research indicates that customer of Islamic banks are more satisfied than conventional banks (Ashfaq. Bank Should try to enhance the spread between interests earned and Interest expense.Virtual banking exists in the forms of ATM. Non Performing loans should be brought at minimum level to enhance interest income and strong liquidity position of the bank. Bank should invest more in securities and efficiently manage the investment portfolio to generate the high returns enhancethe spread between interest return and interest expense. The effectiveness score ratio of NIB Bank is lowest of all major competitors. The reason for this is the low spread between the interest income and interest expense and low non interest income. or ideas that are accepted by markets. Gold not only is the most liquid securityit also provide an increase in value with the time. Security with high liquidity are the best suited like gold.e. It enhanced the competition among Islamic and conventional banks to attract and retain larger number of customers. and society.The effectiveness scores obtained indicate how effectively the banks are transforming the outcomes of the stage 1 (Efficiency) to accomplish the pre-determined policy objectives of the banks i. Virtual banking has brought innovation in banking in recent years.The entire customers should be provided with the login and password so they can manage their accounts by using their home PC.(Wikipedia)  Pakistani banking sector has experienced an expansion in banking industry due to globalization and entrance of Islamic banks in the market. Innovativeness: Innovation is the creation of better or more effective products. The earning assets are not generating enough returns to meet all the expenses of the bank.  . processes. This is possible by injecting more money in equity stock or receiving deposits to create investment opportunities. phone banking. NIB bank is still behind in Islamic banking. Majority of banks has introduced the Islamic banking along with the conventional banking.Transfer funds. net interest income and non interest income. Customers of NIB should be able tochecktheir Account Balances. They should bring an innovation by introducingIslamic banking as well to attract more customers. Virtual banking is broadly defined in this as the provision of banking services via means other than traditional physical branches. Pay their Mobile Phone Bills via internet and mobile phones. 2010). Pay their Utility Bills. services. MCB is the leading with virtual banking. home banking and Internet banking. governments. Non performing loans can be reduced by taking the securities with 100% of margin. technologies. Kashif&Nadeem.

employees have also adequate support from the management. Bank should formulate a new department for managing the portfolio of the customer’s stock and maximizing the return for the customers in return of commission.Each depositor can use his individual relations to bring new customers and new customers can use their relations as well as so resulting in endless chain creating endless opportunity for the bank. employees are courteous with the customers but the customers are not feeling safe while transacting with the bank. Another innovative idea for being distinctive is to introduce the network marketing in bank. Responsiveness towards government and State bank of Pakistan 3. Satyakama and Sujit(2010) used Customers’ Confidence on Employees.Kalyan. Responsiveness towards State Bank of Pakistan and Government:  NIB bank has maintained special cash reserve of 15% as required to be maintained with the SBP on deposits held under the new foreign currency accounts. NIB bank can be innovative by offering deposits for shares. Results shows that the customers have confidence on the employees. .(1991). Each depositor will be rewarded with the commission for bringing a specific amount of deposit in the bank. Responsiveness towards the organization itself. Interviews were conducted using mall-Intercept technique to study the responsiveness of NIB bank towards its customers. Responsiveness towards customers 2. Responsiveness towards customers: Responsiveness is the willingness to provide help and prompt service to customers (Parasuramanetal. Uma Sankar. to let the depositors become partners in the business after opening their account in the bank. In this way bank not only can gain distinctive competency which can lead to competitive advantage but also can maximize the net interest income by charging commission for the service. Courteous Employees and Adequate Support to Employees to study customer responsiveness towards banks. I have used the same variables to study NIB bank responsiveness towards its customer. Safe Feeling of Customers in Transaction.  Bank Responsiveness: Responsiveness can be considered from three angles: 1. It will not only create the income opportunity for the depositors but also the deposit opportunity for the bank. The reason for this is low market price of NIB shares and heavy losses in recent years.

312-31. European Journal of Operational Research. pp. . and volunteers along with medical supplies to the affected population. Berger. 20 No. Benston. (1997). References: Drucker. Journal of Finance. Analyzing the Determinants of Bank Efficiency: The Case of Italian Banks Claudia Girardone.2. "Efficiency of financial institutions: international survey and directions for future research". 98 No. An Introductory View of Management.M. The Bank's capital adequacy ratio as at December 31. A. (SHO). Humphrey. Vol. LL57 2DG. Philip Molyneux*.175-212. Proper books of accounts have been kept by the Bank as required by the Companies Ordinance.2. P.. Banking and Economics. 2011 was 14. "Branch banking and economies of scale". several NIB staff participated in this initiative with exemplary zeal and dedication that brought a team of doctors. Gwynedd.11% compared to the minimum regulatory requirement of 10%. New York. 1984 (KPMG Taseer Hadi & Co.  Responsiveness towards society:  When our country was hit by the most devastating floods in 2011. Sanghar and other rural areas of Sind district. D. (1965). Vol. University of Wales. NY.J. UK. . G. pp. The Bank ensures adherence to SBP's requirements by monitoring its capital adequacy on a regular basis. As was done in 2010. Bangor. Gardener School of Accounting. paramedics. NIB Bank had proactively organized free medical camps in the worst flood affected district areas of Badin. (1977). Tando Adam. Edward P. Chartered Accountants). Harper College Press.

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