OF the over 30 years he has been in banking, Syed M. Husaini spent his first 10 years overseas with international banks in South Africa, Kenya and the Middle East. He helped in setting up a microfinance bank in Karachi as its first CEO. He joined Askari Bank as President and CEO on June 3, 2013. Here, he gives an overview of the things changing course since the Fauji Group’s takeover of the bank.

Despite Pakistan’s rollercoaster economy, banking has generally flourished and created a class of skilled bankers who have excelled internationally. Much of the success was attributable to the State Bank’s oversight, while commercial banks strictly adhered to rules governing their operations.

Like all commercial banks, Askari Bank has seen ups and downs since its inception. In 2004, it was Pakistan’s leading bank within its peer group. Gradually, over the years, the bank slipped and couldn’t keep pace with competition.

A lack of focus on business, slow growth in branch network, concentration of business in a few locations, low interest margins, all resulted in low revenues. Like other banks, Askari Bank too was inundated with a growing bad loan portfolio. Something had to be done. As a planned strategy, Askari was acquired by the reputed Fauji Group in June 2013.

The Fauji Group is one of the largest conglomerates in Pakistan, with interests in fertiliser, cement, food, power generation, gas exploration, LPG marketing and distribution, and financial services.

If banks can come out through difficult times as Askari has done in the past one exceptional year, trust in banking will get a definite boost. By setting right key elements of core banking, Askari’s market perception has improved. With the change in sponsors and with the new management in place, the bank has shown huge growth in resource-mobilisation and profitability. Comparing the third quarter of 2014 with the prior year, the growth rate in profit is one of the highest in the industry.

The branch network has grown rapidly to 320, with further plans for expansion for 2015. The bank has one branch in Bahrain, and has also got permission to open a representative office in China.

Moving from a net loss of Rs5.4bn in 2013 to a net profit of Rs3.1bn in the nine months ending September 30, 2014 (9MCY14), key financial analysts didn’t lose time in ascertaining the sources of the bank’s revenue. Their consensus opinion largely credited the bank’s good financial management. During 9MCY14, the bank also announced a 10pc cash payout, after a gap of more than seven years.

Employees have played the most important role in the turnaround, inspired by the core ingredients of leadership, including capacity- and team-building, placing the right people at the right job, promoting collective and innovative thinking, and enhancing the culture of transparency.

For growth and enhanced business penetration, processes and structures were reorganised to simplify product delivery, backed by efficient customer services. Branch expansion has also come in handy for business growth. These factors enabled good operating results during the three quarters of 2014. And employee empowerment, reward and compensation initiatives have been key towards enhancement of employee morale and motivation.

On the back of the new management, the year 2013 saw a prudent recognition of both non-performing loans and provisions, as the decision was taken to clean the bank’s balance sheet. This gave the bank a fresh start. Due to the provision charge and lower revenues, the bank recorded a net loss in 2013. However, it quickly returned to profits and has been maintaining a steady growth pattern since the beginning of 2014.

In the latest published financial statements for 9MCY14, the most notable element of the turnaround is the strong growth in net interest revenues, depicting efficient asset-liability management, which is the core banking activity.

The cost of funds remained low mainly due to a rise in current accounts and spread in the core deposit base.

Overall, the bank saw a good improvement in net interest margins. Fee, commission and brokerage income also registered a healthy increase, reflecting improved trade business undertaken by the bank. By September 30, NPLs had fallen 5pc to Rs31bn. Correspondingly, the level of increased provisions has resulted in an improved loan loss coverage ratio.

Customer deposits have grown and a healthy rise was seen in non-remunerative current accounts. The capital adequacy ratio, after dipping in 2013 due to the net loss, has bounced back to 13pc mainly because of the improvement in net profits and the Tier 2 capital that was raised during 2014.

The bank has a relatively advanced technology platform and all of its branches and ATMs are linked online in real-time through a satellite communication system. The unutilised features of available technology are put to good use with continuous integration and development. Simultaneously, the entire alternate delivery channel infrastructure has been revamped, and this has immensely contributed towards improved market perception of the bank.

In a very short span of less than a year, most of the bank’s key performance indicators have become comparable with those of its peers, particularly in the area of profitability, where growth has been the highest. Askari is confident that its growth rate will continue to rank amongst the highest amongst its peers.

Published in Dawn, Economic & Business, January 26th , 2015

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