Lahore (Usman Shami) – “We have transformed Bank of Punjab from a loss making entity to a healthy bank with sound financials within last few years”, Mr. Naeemuddin Khan claimed while talking to senior journalists at the headquarters of BOP in Lahore, earlier this morning. He revealed that in 2008, the BOP suffered total loss of around Rs. 17 billion, whereas in 2015, it generated Profit before tax of around Rs. 5.7 billion (up till the month of September).
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He said that during the period of 2009-2015, bank deposits witnessed a growth of 117 percent and touched the level of 356.6 billion rupees. The bank was also able to drastically cut the cost of deposits to 5.32 from 10.8 percent as compared to the previous years. In 2013, the bank also introduced Islamic Banking under the name of ‘Taqwa Islamic Banking’ and now the bank has a network of 39 Islamic banking branches online.
He abstained from revealing financials for the whole year, as the reports have yet not been approved by the bank’s board of directors. He revealed that when he was given the job, he had two options – ‘to keep taking salary while maintaining the status quo or to try and turn the institution’. In his words, “he chose the latter and asked Chief Minister Shahbaz Sharif to give him freedom of operation and to ensure zero political interference in the bank”. According to Mr Naeemuddin the CM kept true to his promise, which in turn ensured merit and transparency in the organization thus enabling this unprecedented turn around.
Mr. Naeemuddin also dispelled the common perception that the BOP has been able to generate profits in the recent past due to heavy lending to government institutions and avoiding exposure to private borrowers. He said that more than 80 percent of lending has been to the private sector; the BOP has only started financing government initiatives in the recent past. He added that the BOP had provided Rs. 1.2 billion financing for Lahore metro project, which (contrary to popular perception) has been fully paid back.
Similarly Rs. 1.37 billion were provided for Islamabad metro project out of which around Rs. 1 billion is outstanding (which means the loan is performing). Similar is the case of Quaid-e-Azam solar power park’s financing. Moreover, Rs. 8.447 billion has been provided for Orange Line project against a government guarantee of Rs. 10.7 billion. The remaining amount would be dispersed when required for the project.
BOP is also financing ‘Green Cab Apna Rozgar Scheme’ under which 49,000 vehicles have already been delivered out of a total of 50,000 available under the scheme. The deliveries started in the month of March last year, and so far the scheme has a startling recovery rate of 99.9 percent, an unprecedented phenomenon in the financial world. He stressed that the bank is investing in these schemes to generate profit and these decisions are made on merit rather than due to government pressure. The terms and conditions had been negotiated with the government in detail, keeping the best interests of the bank in view.
The BOP’s president also revealed that due to realization of losses, made during the previous government’s tenure, the bank’s Capital Adequacy Ratio (CAR) had fallen to 1.05 percent in 2009, in 2015 it stood at 11.33 percent. As per State Bank of Pakistan’s requirements ‘CAR’ has to be maintained above 10 percent.
He claimed that during PML Q’s tenure loans worth more than Rs. 20 billion had been given to some members of the board, a clear case of conflict of interest. These all turned in to bad debts and cases are being pursued against them in the court of law.
Mr. Naeemuddin repeatedly expressed his frustration with the country’s legal system, highlighting that more than 64 defaulters with combined outstanding loans of more than Rs. 51 billion have secured stays from the courts. “Even if a small percentage of this amount is recovered, it could be used to generate more profit for the bank. The courts should seriously consider the impact of these stay orders on the industry, and disperse justice to us as well”, he added, visibly annoyed by the legal hurdles in the recovery of loans. However, he claimed that now the bank has very strict risk management practices in place and the ‘Non Performing Loans’ have decreased by 29% over the last six years.
Mr. Naeemuddin, explaining the purpose of his press conference, revealed that 51 percent of the BOP’s shares are owned by government of Punjab, whereas rest are public, therefore ‘it is our duty to be transparent with public and address any misconceptions about the bank’s performance’. He said, “Such a meeting was never arranged before because we had focused all our energies on revival of the bank. For almost two years most of the staff voluntarily worked even on the weekends to realize this vision.” He also elaborately explained modernization efforts being carried out at the bank, which include a wide range of changes from remodeling of branches to up-gradation of financial software. Mr Naeemuddin also promised a banking revolution in Pakistan by announcing plans to open more than 100 branches of the bank in rural areas of Punjab.