Foreign Banks Continue to Make Handsome Money

Foreign banks operating in Pakistan have succeeded in booking profits in the first quarter of 2016 in contrast to local big banks, which had a tough period to record a decline in their profit growth.

NIB Bank, Samba and Standard Chartered Bank recorded handsome growth in profitability within their target market and limited branch operations mainly in cities.

NIB Bank posted a profit growth of 334% in first quarter of 2016; Samba Bank also recorded a growth of 85% and Standard Chartered Bank witnessed a growth of 15 percent in its profitability.

The beginning of 2016 was quite impressive for the foreign banks which also encountered a tough operational situation in the past few years but their business strategy worked well to recover their profitability journey despite the soft monetary policy period.

Standard Chartered Bank

The bank posted a profit of Rs 3.209 billion in the first quarter of 2016 as compared to Rs 2.776 billion in the similar period of 2015.

The bank not only controlled its expenses through optimization of branches operation and introduction of digital banking services but it also made money through interest income, which are usually higher than local banks.

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Samba Bank

Saudi Arabia-based Samba Bank reported a growth of 85 percent in its quarterly profits.

It earned money through interest income and different avenues including gain sale of securities, dividend income, fee commission and brokerage income.

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NIB Bank

The handsome profit growth of NIB Bank could open doors for its management to again consider a merger with MCB or sell off shares.

It’s important to note that profitability is also because NIB Bank sold out its subsidiary, PICIC Asset Management, in this quarter and that is reflected on its balance sheet.

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The three banks usually have targeted business in corporate sector whereas their customers availing consumer banking services mainly belong to high income group due to comparatively good standard of services against higher charges.

The banks limited operations, good service standard and technological level as compared to local private banks gave them an edge in the market.

These foreign banks are listed at Pakistan Stock Exchange besides there are other banks operating in Pakistan such as CitiBank, Deutsche Bank AG, Industrial and Commercial Bank of China Limited and Bank of Tokyo-Mitsubishi but at limited scale.

It is an irony that all three banks despite making profit did not declare any interim dividend for shareholders though leading banks such as HBL, UBL and MCB recorded decline in profit growth but they announced Rs 3 to 4 per share interim dividend to shareholders.