November 14, 2006	Tuesday	Shawwal 21, 1427

KARACHI, Nov 13: Banks have been spending lavishly on expansion of luxury branches and huge salaries of new picks. This has pushed the administrative expenses by 26 per cent during nine months of this year. They, however, continue to pay miserly to the depositors at rates that do not even cover value of money eroded by inflation.

A research report of a private brokerage house calculated that the banks’ administrative expenses during nine months of 2006 (calendar year) rose by 26 per cent to Rs68 billion.

There has been a demand from the depositors for higher return on their money but the banks have been aggressively working on expansion of their branch network across the country to tap maximum potential. The trend is to replace old styled bank branches by luxurious setups to match the taste of spending classes.

Administrative cost has traditionally been high in Pakistani banks but the depositors were earlier not been given negative returns for such big span of time and especially when banks are doing well.

Some bankers said the highest expenditure was on the salary side as the salary structure had completely been changed in favour of high-ups who drew salaries not less than a million rupees per month, including perks and other facilities. The newly-hired bank officials were getting the highest payments, while discrimination between old and new bankers is also visible.

“We established these banks and are running them successfully for decades but the new recruits are being rewarded with highest payments,” said an official of National Bank of Pakistan.

The discrimination in salaries is also noticeable in the State Bank and the skilled people are leaving the SBP to find better jobs. Banks have been advocating high salaries for the new staff by justifying that skilled bankers were not available in the market.

“Banks have been earning record profits for the last three years and this was the reason for better job environment and attractions,” said a leading banker. However, he admitted that the banking spread in Pakistan was the highest in the region. “Things are changing and the banks are offering higher returns on term deposits.”

Banking spread further increased during eight months of the current year by 114 basis points to push the banking spread at 7.44 per cent. It shows that banks are sill not concerned over the negative return to their depositors.

“Inflation is higher than return to depositors as the banks keep most of the income with themselves. We get nothing,” said Asim Baig, an official at a multinational company.

“Bankers do business in rupees but it seems that they get payment in dollars,” said A. Jaffrey, a depositor and businessman.

Analysts said that the raise in salary was not just limited to the banking sector but the whole financial sector had also witnessed the same increase. The financial sector business has gone up very high during the last four years and its share in GDP also increased from 21 per cent to 27 per cent during this period.