KARACHI, May 13: The banking sector is flush with liquidity since as much as Rs150 billion had been ‘dis-intermediated’, which otherwise would have been borrowed from banks, said Syed Ali Raza, chairman & president, National Bank of Pakistan at the Annual General Meeting of shareholders on Tuesday.

Giving the break-up, he said that the country had received home remittances in the sum of around Rs100 billion; another Rs30 billion had been raised by corporates through the issue of Term Finance Certificates (TFC) while commodity financing had decreased by Rs20 billion due to low demand. All of that made a tally of Rs150 billion. He forecast the next two years to be difficult for the banking industry and said it was time to develop critical mass.

Another important information for the public shareholders, who were attending only the second AGM since the bank offered 20 per cent of its equity in two equal tranches, was that at the meeting of the Bank’s board to be held on May 16, it would be considered to grant voting rights to minority shareholders, subject to the clearance by SBP. “Legally, at 26 per cent holding, voting rights are triggered,” the NBP President affirmed, in reply to a query, but said that he wouldn’t know if and when the Privatization Commission would disinvest further shares in the NBP.

The president boasted that in the year ended December 31, 2002, the bank had made Rs6 billion in pretax profit, which was twice that of last year and the highest profit made by any entity in Pakistan, except for PTCL “which is a monopoly,” he pointed out.

He said that there was no question that spreads had diminished for the banking industry, but unlike many other banks who had improved their earnings through one-off items such as capital gains, NBP’s profit had increased on account of improvement in core earnings.

He said that ratios that were important for banking industry were splendid in regard to the NBP. Pre-tax return on assets was 1.4 per cent; pre-tax return on equity was 45.3 per cent and capital adequacy ratio, that represented depositors’ protection, stood at 14.5 per cent. He contended that globally 8.5 per cent capital adequacy ratio was the benchmark.

The NBP president stated that as a result of corporate restruc-turing of the bank, 225 inefficient branches had been closed down and 3,100 employees had been given the Voluntary Golden Handshake.

“Zones” had been eliminated and number of regions had been enhanced from 9 to 29. He claimed that the NBP commanded 21 per cent of the entire banking sector deposits and had customer base of 10 million, which was 45 per cent of the 23 million customers of all banks combined.

Mr.Ali Raza said that NBP would endeavour to further improve its system of utility bill collections, but observed that since NBP was handling 70 per cent of all bills, minor problems here and there ought to be condoned.

Regarding queries over the ‘written-off’ of loans of Rs3.8 billion, he said that of that Rs1.4 billion was the principal amount and stated that State Bank of Pakistan had given banks the permission to write off loans that are unrecoverable, after all avenues of recovery had been exhausted.

Ali Raza traced the growth of the NBP over the last four years, saying that the bank’s deposits had increased to Rs362 billion at the end December 31, 2002, from Rs294 billion in 1999; shareholders’ equity had risen 40 per cent to Rs14.3 billion from Rs10.3 billion and break-up value of the share had improved to Rs38, from Rs28 (not including surplus on revaluation of fixed assets).