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Macroeconomics Group Assignment:

Banking
Submitted By:      Sarah Umar (M08BBA001) Hafsa Anwar (M08BBA024) Dania Dilshad (M08BBA041) Marreum Siddiq (M08BBA054) Iqra Shaukat (M08BBA060) BBA(Hons.) Banking & Finance 5th Semester (2008-2012) Hailey College of Banking & Finance University of the Punjab

Macroeconomics Assignment: Banking

Table of contents

Acknowledgement ...................................................................................................... 3 Meaning of bank ......................................................................................................... 4 Introduction & History of Banking in Pakistan ............................................................. 4 Establishment of State Bank of Pakistan .................................................................... 5 Banks in Pakistan ....................................................................................................... 5 Banking organization in Pakistan ................................................................................ 7 Changes introduced in banking system ...................................................................... 7 Economic environment Of Pakistans banking sector ................................................. 8 Technological advancement in banking sector ........................................................... 9 Ways to improve commercial banking in Pakistan.................................................... 11 Role of development financial institutions ................................................................ 12 Current performance of Pakistans banking industry:. .............................................. 14 Contribution towards Pak-Economy ........................................................................ 15 SWOT Analysis: ....................................................................................................... 16 References: .............................................................................................................. 18

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Macroeconomics Assignment: Banking

Acknowledgement
All acclamation to Allah who has empowered and enabled us to complete the task successfully. First of all we would like to thank Allah Almighty who really help us in every problem during the project. we would like to express my sincere and humble gratitude to Almighty whose Blessings, help and guidance has been a real source of all our achievements in our life. We would like to admit that we completed this project due to parents who always pray for our success. We also wish to express our appreciation to our respected teacher

Mam Hamida Batool


Because of whom were able to get such precious knowledge

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Macroeconomics Assignment: Banking

Meaning of bank
The word Bank is derived from the Italian word BANCO, which means a table or a counter. In the opinion of the scholars of banking, the reason why this word was given to the banking business was that when the trade and the business of exchange of money was flourishing in Italy, the money changers used the wooden benches to carry out their business.

Introduction & History of Banking in Pakistan


"BANKING BUSINESS" means the business of either or both of the following: y receiving from the general public money on current, deposit, savings or other similar account repayable on demand or within less than [3 months] ... or with a period of call or notice of less than that period; paying or collecting cheques drawn by or paid in by customers

Before the creation of country, the role of Muslims of the areas which were later included in Pakistan was of no significance due to their restricted participation in the banking sector. There was only a small banks namely Australasia Bank having a few branches in Lahore. In 1942, the Australasia bank was housed in a garage of a trader of Lahore who used to trade at a small scale with Australia during that period. There was only one Bank which was run by the Muslims of the sub-continent was Habib Bank. It was established in 1941. At that time Quaid-e-Azam Mohammad Ali Jinnah expressed his desire that another Muslim bank also be established in Calcutta which came into reality when Adamjee established Muslim Commercial Bank a few months before the creation of Pakistan in Calcutta. When Pakistan came in to being The Habib Bank shifted its Headquarters from India to Karachi. A few of Habib Bank's branches were already in operation in Pakistan. The Muslim Commercial Bank also moved its headquarters from Calcutta to Dhaka and later on to Karachi. At the time of independence, another small bank namely Bank of Bahawalpur also started business from Bahawalpur from December 1947. Before independence, the financial sector was in the hands of foreign banks some of them were British by origin. At the time of independence, two major banks including Punjab National Bank at Lahore and Comila Banking Corporation were working in the then East Pakistan. This trend was so obvious that the total number of Macroeconomics Page 4

Macroeconomics Assignment: Banking bank offices between June 30, 1918 and August 14, 1947 were reduced from 631 to 195 only.

Establishment of State Bank of Pakistan


In the early days of Pakistan, the government worked hard to establish and strengthen the banking system in Pakistan. These efforts resulted in the establishment of State Bank of Pakistan which was inaugurated by Quaid-e-Azam on July 1, 1948. Zahid Hussain, who was the first Governor of the State Bank devoted all his time and energy to modernize the working of the State Bank. The establishment of the National Bank of Pakistan was yet another milestone in the banking history of Pakistan. In September 1949 the rupee value was reduced against the Pound sterling which was a major event in the banking circles.

Banks in Pakistan
Nationalized scheduled banks
y y y y

National Bank of Pakistan The Bank of Punjab The Bank Of Khyber The Sindh Bank

Specialized banks
y y y

Industrial Development Bank Zarai Taraqiati Bank Limited SME Bank

Development financial institutions


y y y y y y y y y

Pak China Investment Company Limited Pak Kuwait Investment Company Limited Pak Libya Holding Company Limited Pak Iran Joint Investment Company Limited Pak-Oman Investment Company Limited Saudi Pak Industrial and Agricultural Investment Company Limited House Building Finance Corporation Investment Corporation of Pakistan Pak Brunei Investment Company Limited

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Macroeconomics Assignment: Banking

Commercial banks
y y y y y y y y y

Allied Bank Limited Bank Alfalah Habib Bank Limited Bank AL Habib Standard Chartered Bank Limited Citi Bank Limited United Bank Limited Askari Commercial Bank MCB Bank Limited

Discount and guarantee houses


y y

First Credit & Discount Corp Limited National Discounting Services Limited

Housing finance companies


y y y y

Asian Housing Finance Limited Citibank Housing Finance Company Limited House Building Finance Corporation International Housing Finance Limited

Micro finance banks


y y y y y y y y y

Micro Finance Bank Limited The First Micro Finance Bank Limited Khushali Bank Limited Karakuram Bank Network Micro Finance Bank Pak Oman Micro Finance Bank Rozgar Micro Finance Bank, Karachi Tameer Microfinance Bank Limited Kashf Microfinance Bank Limited

Islamic banks
y y y y y y

Al-Baraka Islamic Bank (Merged into Al Baraka Bank ) Bank Islami Pakistan Limited Dubai Islamic Bank Pakistan limited Dawood Islamic Bank Limited Emirates Global Islamic Bank Limited (Merged into Al Baraka Bank (Pakistan) Limited) Meezan Bank Limited- Premier Islamic Bank In Pakistan

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Macroeconomics Assignment: Banking

Banking organization in Pakistan


Pakistans financial sector consists of Scheduled Commercial Banks which include nationalized, foreign, and private banks and Non-banking Financial Institutions which include Development Finance Institutions, Investment Banks, leasing companies, modarabas, and housing finance companies. Scheduled Banks regulated by the State Bank of Pakistans Prudential Regulations. Modarabas and leasing companies are being regulated by the Securities and Exchange Commission of Pakistan which is a body corporate. Among the scheduled banks, only Pakistani commercial banks are listed. The banking sector in Pakistan has been going through a comprehensive but complex and painful process of restructuring since 1997. It is aimed at making these institutions financially sound and forging their links firmly with the real sector for promotion of savings, investment and growth. Commercial banks have been exposed and withstood several types of pressure since 1997. Some of these are: 1) Multipronged reforms introduced by the central bank 2) Freezing of foreign currency accounts 3) Continued stagnation in economic activities and low growth 4) Drive for accountability and loan recovery.

Commercial banks operating in Pakistan can be divided into four categories:


1) Nationalized Commercial Banks (NCBs) 2) Privatized Banks 3) Private Banks 4) Foreign Banks

Changes introduced in banking system


Despite formulating good policies Pakistan has not been able to attain the desired results mainly due to poor implementation of the polices. De-regulation of the financial sector and capital markets led to rapidly increasing growth of banking companies in the private sector.

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Macroeconomics Assignment: Banking Many big industrial groups set up their own banks. The new banking sector reforms have also stripped the government of its powers to interfere in a banks operations. All such powers now rest with the SBP only, thereby significantly reducing political influence in financial institutions. After the change the SBP has taken a number of steps to introduce professional management in the nationalized banks. The strategy of the SBP is to, first improve the quality of new loans and then to tackle the non-performing loans problems. All nationalized banks have been asked to curtail their overheads, especially the head counts. Professionals from the private sector have been appointed as Presidents to improve the health of nationalized banks and make them more attractive for privatization.

Economic environment Of Pakistans banking sector


In recent years, growth in Pakistans banking sector has been remarkable and unprecedented. Classified as Pakistans and regions best performing sector, the banking industrys assets have risen to over $60 billion, its profitability is exceptional and at an all-time high, non-performing loans (NPLs) are at an all-time low, credit is fairly diversified and bank-wide system risks are well-contained. Almost 81% of banking assets are in private hands. Likewise, the present foreign stake comes to 47% of total paid-up capital of all the financial institutions regulated by State Bank. It pointed out that aggregate financial soundness indicators have improved since early and continue to exhibit strong performance. Having observed the experiences of the global economy, the way forward for the financial sector is to maintain both the simplicity and transparency of product structures. Growth in Banking Sector and its profitability is unprecedented. Banking assets rose three-fold over the last 5 years and industry size is reaching Rs4 trillion. The banking sectors assets to GDP ratio grew from 47.2% in CY00 to 55.6% in CY05 since the growth in banking assets outpaced the nominal GDP; these trends are in sharp contrast from the declining trend in banks assets to GDP ratio during the second half of the 1990s. Supported by privatization and consolidation, assets of the banking sector have shifted from public to private sector and there is a decline in asset concentration within the banking sector. This changing structure had far-reaching implications for the banking sector profitability. Sustainability of banking sector reforms:

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Macroeconomics Assignment: Banking What lends confidence to bankers that are fast expanding their stakes and interest in Pakistan is the (i) high and sustainable economic growth that the country is set on; real GDP in the past 2 years grew by 8.6% and 6.6% and is now set to register another 7% growth; (ii) Real consumption expenditure is on the rise and leading the demand growth, boosted by doubling of per capita incomes to $850, a fourfold increase in remittances over few years, rising industrial capacities for consumer durables, automobiles, etc. and growing role of consumer financing and personal loans in meeting the demand for Consumer goods. (iii) In recent years, investment spending has gained substantial momentum and will be rising further as the Government and private sector launch and implement large infrastructure projects. The Government has plans to add 5000 MW new power capacities in private sector along with a number of hydral projects, highways and port infrastructure, while catering for the development of large urban infrastructure to upgrade large cities (iv) foreign direct and portfolio flows is at an all time high and is expected to further grow given the economic potential and high returns on equity in both corporate and banking sectors.

Technological advancement in banking sector


The internet and the mobile phone that are the two technological advancements that have profoundly affected all of us in the last decade now on boom. The products of this association are mobile data services. One area of activity is mobile banking (one of the first areas of commercial transaction on the wireless internet). Banking is an area that has extended in many different ways in recent years, including telephone and online banking. M-banking provides yet another channel for banking services, and in emerging markets, provides some possibility for becoming a primary channel. Mobile banking, a symbiosis of technology and financial services, is the hottest area of development in the banking sector and is expected to replace the debit/credit card system, online or net banking in future. Now focus is on about mobile banking, its use and applications in bank sector. The technology required in mobile banking and some barriers like fraud and security. At present, modern technology allows banking to exist in four very different environments. The first of which is the rise and rise of telephone banking.

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Macroeconomics Assignment: Banking Introduced in the early 80s, telephone banking allows customers to access and administer their accounts using a handset or keyboard attached to a phone line. The internet also provides individuals with another means to administer their bank accounts. It was introduced in 1994, internet banking enhanced and developed the service already provided by phone lines. It allowed customers to conduct tasks such as fund transfer, investment, and electronic bill payment and complete applications for other financial features such as loans and credit cards. It is though the number of internet users who bank online now exceeds 50%.

ATM (automated teller machine) has brought numerous changes.


It was invented in 1960. The ATM machine is now a familiar feature on the high street and provides an accessible and familiar means to access funds for those going about their daily business or even holidaying and travelling abroad. Although the most noticeable technological changes to banking have occurred out with the walls of these financial institutions themselves, there are also other noteworthy developments that aid the experience of employees and customers within the banks themselves. Enhanced databases and in-house software packages mean tellers can access numerous customer accounts at once. For individuals working within the credit or loan sector, software packages now exist that help to calculate lending risk as well as borrowing time which ultimately provides a safer, secure and speedier banking experience from the bank and beyond.

Networking and ISP:


All offices of the Banks are accessing the Internet, email and business applications across the installed network.

Operational support for I.T staff:


The Information Systems Department provides services and solutions to improve and strengthen SBPs technology portfolio and identify future requirements. On completion of the IT project the entire responsibility for the maintenance and support of the system will be taken over by the ISD. The ISDs role is not limited to automation within SBP, but also enhances and facilitates the growth of technology and its impact on the operational development of the entire financial industry. Information Systems Department (ISD) provides departments and subsidiaries with easy-to-use and reliable in-house developed software systems.

CIB Online
Another project, which was made successful with the collaboration of ISD and the Pakistan Banking Association (PBA), is CIB (Credit Information Bureau) Online. Macroeconomics Page 10

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IT Security:
ISD has started work on various IT related Security aspects at Banking sector. This covers: IT Risk Management IT Security Policies (drafting, implementing, monitoring, revaluating and revising) Disaster Recovery Site Other security implementation and enhancement projects

Network Support
This includes Critical Services monitoring, Routine Networking tasks, end user support, Network Management Station installations, LAN support and Support for Network development team deliverables. Besides this ISD provides Network support for various other related projects.

Ways to improve commercial banking in Pakistan


Nationalized Commercial Banks (NCBs)
NCBs are still the markets dominant players, controlling about 51% of the entire banking sector deposits and 50% of advances. NCBs have the most extensive branch network with deep penetration in both urban and rural Pakistan - a major competitive advantage over their more urban - oriented Newly Established Private Banks and foreign banks. This extensive network has allowed NCBs to tap into a lucrative base of low cost and stable deposits. However, this has come at the expense of high operational costs and a large number of loss making branches. NCBs have also been victims of political interference, which is reflected by their high share (roughly 58%) of total loan Most of the loss making branches must be shut down defaults. Operational inefficiencies and unusually high loan defaults have resulted in huge losses, decline in shareholders equity and low yield on earning assets. To overcome these and to restructure the NCBs it is essential to appoint professionals from the private sector in the management.

Denationalized Banks (DNB)

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Macroeconomics Assignment: Banking Of the DNBs, both MCB and Allied Bank have managed to show strong performance after privatization. To reduce costs, it is also required to decide for closing down of its unprofitable branches and redundant workers must be offered golden hand-shakes.

Newly established private Banks (NEPB)- Foreign Banks (FB)


Most NEPBs restrict operations to short term trade-related financing, with the exception of the larger private banks such as Askari, Faysal and MCB that have limited long term exposure. Increased competition in the banking sector will force smaller banks to either sell out to other larger banks or merge. A small capital base will also restrict branch expansion of smaller banks, forcing them to focus on relatively smaller retail clients. Hence, it is foreseen that a major merger/acquisition potential in the banking sector. Competition would also spill over to other customer services such as provision of ATM machines and better banking facilities. Again, only the larger banks would be able to invest in automation technology and branch expansion necessary to improve efficiencies and mobilize cheaper funds FB comprise 24% of total advances and deposits within the banking system, but as a percentage of total profitability they are far ahead. A major constraint for foreign banks is the restrictions placed on branch expansion by the SBP. This should be according to liberalization policy to relax restrictions on foreign banks in emerging economies.

Role of development financial institutions


Development Financial Institutions in Pakistan are mainly involved to perform developmental roles through the provisions of credit to the agricultural and industrial sector. Many of the DFIs are heavily dependent on SBP funding. These are: PICIC IDBP ADBP NIT ICP HBFC NDFC BEL Equity Participation Fund

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Macroeconomics Assignment: Banking NDFC can be ranked first in the DFIs. It was set up by the Federal Government in 1973 for the purpose of lending to the public sector and since 1980 also to the private sector. Apart from its traditional activities of providing loans, advances and lease financing on a short, medium and long-term basis and accepting deposits of fixed maturities, the NDFC is now engaged in bridge financing, trade financing and , through its merchant banking division, in underwriting, equity investment, bond floatation and financial advisory services. With the Governments assistance, it is also involved in raising loans in foreign currency for infrastructural and developmental projects. NDFC continues to play a leading role in development and the financing of infrastructure to facilitate industrial development (e.g. in the oil and gas sectors, under the private energy financing initiatives). PICIC was incorporated in 1957 as a medium through which financial and other assistance could be provided to the private industrial sector of Pakistan. Its objectives are:  to stimulate the development of the country by providing finance for the establishment of new industries as well as for the balancing, modernization and expansion of existing industries in the private sector;  to assist in broadening the base of industrial ownership in the country, thereby developing the stock market; and  to encourage the establishment of viable projects in under- developed regions of the country. The current activities of PICIC comprise: medium and long term lending, in both domestic and foreign currencies, generally for the acquisition of fixed assets; the provision of loans for working capital; the provisions of underwriting assistance; equity finance; industrial promotion; the provision of guidance and counseling service to clients. IDBP succeeded the Pakistan Industrial Finance Corporation in 1961 to promote small and medium-sized industrial enterprises in the private sector by way of providing term loans for the establishment of new industrial units and to meet the expansion, modernization and replacement needs to existing industrial units. Today nearly 90% share capital is held by the Federal Government and the balance by government-controlled financial institutions or Provincial Governments. IDBP give priority to the financing of small projects, especially agricultural, export-based or engineering. The dispersal of industrial in less-developed regions, and the promotion of new industrial capacity consistent with the financial targets and socio-economic objective established in the five year plans.

BEL established in 1980 with the principal objective of accelerating the pace of
industrial development, primarily in the private and mixed sectors of the economy. It was first sponsored by the SBP and in 1996 government privatized it by selling its 26% shareholding to LTV Consortium. New management of a privatized financial institution ensuring to provide financial facilities to enterprises in the private sector through equity participation, and profit and loss shares modes of financing. Macroeconomics Page 13

Macroeconomics Assignment: Banking

Current performance of Pakistans banking industry:


.

Pakistans banking sector has remained remarkably strong and resilient, despite facing pressures emanating from weakening macroeconomic environment since late 2007. Pakistans economy witnessed a noticeable improvement in the macroeconomic indicators during (2009-2010 ) as the economy grew at a rate of 4.1 percent compared with only 1.2 percent in the preceding year. There was substantial decline in annual inflation and current account deficit. Foreign exchange reserves also rose to historic highs during the year. Local and foreign banks witnessed accelerated rise in advances, deposits and investments in the final quarter of 2010, leading to surprise earnings in quarterly results. The State Bank of Pakistan statistics showed the advances, deposits and investments of the banks grew by 6.9 percent, 15.8 percent, and 9.7 percent respectively in 4Q 2010 with calendar year 2010 growth totaling to 6.8 percent, 18.5 percent and 27.8 percent respectively. The accelerated growth in the asset base of banks, leading to the full year growth to 13.4 percent to reach Rs 6.8 trillion or $ 79 billion. Advances and investments led the way, as both have registered sharp growth in 4Q and up 6.9 percent and 15.5 percent to reach Rs 3.5 trillion or $ 40.8 billion and Rs 2.1 trillion or $ 24.5 billion respectively. The credit to the private sector has also shown an encouraging trend with Rs 113 billion disbursed so far in the current FY11, particularly on account of commodity financing which has further been aided by high commodity prices. Deposits rose by 9.7 percent to record an 18.5 percent rise in the calendar year and reach Rs 5.1 trillion $ 59.8 billion. The increased liquidity in the system is due to high monetary aggregate (M2) growth, pushed up by high government borrowing and favorable BOP. Further, with 6 month KIBOR at 13.19 percent up 84bps on quarterly basis and 80bps on a yearly in 4Q. The net Interest Margins are likely to head north and keep reported earnings strong.The fiscal deficit bounced back to 6.3 percent of GDP in FY10, i.e., 1.1 percentage points higher than in the previous year. FY10 fiscal performance was characterized by continuing expansion in fiscal and quasi-fiscal operations that crowded out and otherwise undermined private sector activities, supported the persistence of double-digit inflation, and increased the total public debt and liabilities substantially, from 68.7 percent of GDP in FY09 to 69.5 percent in FY10. Although the quarterly data usually comes in strong off take growth, the 4Q 2010 is highest since 2007. Investments, on the other hand continue to take up Macroeconomics Page 14

Macroeconomics Assignment: Banking increased share of liquidity generated via high deposits, more so after the discount rate hikes in 2H 2010; and returns earned from these remained an earnings booster for 4Q.However, the size of provisioning losses as industry wide expenses increased up to Rs 15.9 billion in 2010, which is bound to eat away profitability in some cases.

Referring to recent unprecedented floods in the country, it is predicted that the various FY11 macroeconomic targets have suffered a serious setback early into the year as large areas of the country were devastated by widespread rains and unprecedented floods. In this backdrop, GDP growth is likely to be between 2 percent to 3 percent in FY11, average annual inflation is expected to be 13.5 percent to 14.5 percent while the fiscal and current account deficits are likely to be between 5.0 percent to 6.0 percent of GDP, and between 3.0 percent to 4.0 percent of GDP. Furthermore, it projected that workers remittances are likely to stay between $9.5 billion to $10.5 billion while exports and imports are likely to be between $20 billion to $21 billion and $34 billion to $35 billion, respectively..

Contribution towards Pak-Economy


Banks play very important role in the economy of a country and Pakistan is no exemption. Banks in Pakistan account for 95% of the financial sector. Pakistan has a well-developed banking system, which consists of a wide variety of institutions ranging from a central bank to commercial banks and to specialized agencies to cater for special requirements of specific sectors. The country started without any worthwhile banking network in 1947 but witnessed phenomenal growth in the first two decades. By 1970, it had acquired a flourishing banking sector. Pakistan's banking sector has remained remarkably strong and resilient during the world financial crisis in 200809, a feature which has served to attract a substantial amount of FDI in the sector. Stress tests conducted on June 2008 data indicate that the large banks are relatively robust, with the medium and small-sized banks positioning themselves in niche markets. Banking sector turned profitable in 2002. Their profits continued to rise for the next five years and peaked to Rs 84.1 ($1.1 billion) billion in 2006. The era of 90s was the climax of privatization, deregulation and restructuring in the domestic banking industry and financial institutions. The Government only owns the National Bank but 80% of bank assets are in private sector. Banking assets rose three-folds over the last five years and the industry size is reaching Rs 4 trillion. The contribution of banking sector to GDP ratio is 55.6%. Pakistan has been ranked. 2nd in performance and efficiency indicators among the South Asian countries by the World Bank. There are 68 scheduled banks of which the top five have 50% of the

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Macroeconomics Assignment: Banking market share. Banking industry, in Pakistan, is currently under a wave of Mergers and Acquisitions (M & As). There are on average 3 M & As per year. 1. Public Sector Commercial Banks: National Bank of Pakistan, First Women Bank Limited, The Bank of Khyber, The Bank of Punjab 2. Local Private Banks: Askari Commercial Bank Limited, Bank Al-Falah Limited, Bank Al Habib Limited, Bolan Bank Limited, Faysal Bank Limited, PICIC Commercial Bank Limited, UBL, MCB, ABL, 3. Foreign Banks: ABN Amro Bank, Al Baraka Islamic Bank, American Express, CITI Bank, Deutsche Bank, Emirates Bank, IFIC, Hong Kong Shangai Banking Corporation, Standard Chartered Bank, etc.

SWOT Analysis:
SWOT analyses take into account the strengths, weaknesses, opportunities and threats face by a business, an organization or operation, in serving customers, stakeholders and their own employees. A SWOT analysis of the banking industry will list these four components and illustrate for executives and management the areas the industry is performing well and also the area where the performance is not so well. The SWOT also highlights the areas where there is opportunity to develop further and areas where there is potential to be hurt in the future.

Strengths
The "Strengths" portion of the banking industrys SWOT analysis is a list of the internal operational elements where the banking industry is succeeding or excelling. These elements need to refer to features the industry can control and has a direct power to change. The banking industry has the following strengthen points: y y y y The banking industrys has record-high recent annual returns. It has diversified investment portfolio offerings It has decreases its transaction and trading fees. An increase in the number of ATM machines.

The market share of banking industrys has also increase in recent year.

Weaknesses
The "Weaknesses" element of the banking industrys SWOT analysis is a list of the internal operational elements the banking industry needs to improve upon. These Macroeconomics Page 16

Macroeconomics Assignment: Banking elements need to refer to features the industry can control and has a direct power to change. The banking industry's weaknesses include high loan rate. y y y y Low bond credit ratings. An increased number of outstanding junk bonds. An increase in loan-sharking activity. An increased number of high-risk investment options.

Opportunities
The "Opportunities" part of the banking industrys SWOT analysis is a list of the external environmental elements the banking industry can potentially take advantage of in the near future or long-term. These external environmental elements should not reflect the internal components of the industry, but rather the factors or features outside the industrys control. The banking industrys opportunities include: y y y y y A growing economy. Banking deregulation. Increased client borrowing. An increase in the number of banks. An increase in the money supply. balances.

y Low government-set credit rates and larger customer checking account

Threats
The "Threats" component of the banking industrys SWOT analysis is a list of the external environmental elements that can potentially harm the banking industry. These external environmental elements do not reflect the internal components of the industry, but the factors or features outside the industrys control. y y y y y The banking industrys threats could include: A declining economy, An increased banking regulations. Larger capital gains taxes. New high-risk investment vehicles or higher health care costs.

Its important to realize these examples are not black and white. For example, new high-risk investment vehicles are inherently a liability because they include increased risk, but depending on the financial stake and position, it could be an opportunity or threat. Macroeconomics Page 17

Macroeconomics Assignment: Banking

References:
y y y y y y Sbp.com.pk Google.com Wikipedia.org www.economywatch.com/world_economy/pakistan www.finance.gov.pk www.dawn.com/tag/pakistan-economy

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