Having just completed its best year ever, the Bank of Khyber will continue the rapid expansion of its branch network, with 16 new branches slated to be opened in the year 2012, said CEO Bilal Mustafa.
On March 7, 2012, the bank declared its financial results for the year 2011, and declared a net income of Rs872 million, or about Rs1.41 per share, its highest ever. As a result, the bank’s management sounded upbeat and optimistic during a meeting with the Khyber Union of Journalists. If the bank’s planned expansion goes through, it will have 78 branches across the country by the end of the year.
Mustafa seemed keen to emphasise that the Bank of Khyber had recovered from the forced Islamisation that had been imposed upon it by the previous provincial administration dominated by the religious coalition Muttahida Majlis-e-Amal (MMA). The MMA-led government had amended the bank’s charter to make solely an Islamic bank and forced its management to make the transition.
“Because of the conversion of all its liabilities, accounts and operations into Shariah-compliant mode, the bank’s recovery and reconciliation became an immensely complex exercise,” said the CEO.
The bank was able to regain its conventional banking status in 2009 under the secular left-wing Awami National Party-led government and has since opened 28 branches across the country, both conventional and Islamic. “But the bank is still struggling from the repercussions of that decision,” said Mustafa.
The Bank of Khyber is 70% owned by the Khyber-Pakhtunkhwa government, with the remainder owned by private shareholders through the bank’s listing on the Karachi Stock Exchange. Given its government ownership, however, the bank has a mandate to lend in circumstance where private banks may pull back.
“Other banks have denied lending rights to their regional offices in Khyber-Pakhtunkhwa because they fear not being able to collect on loans due to the security situation. But we have been continuing to lend to people,” said Mustafa.
The Bank of Khyber has done remarkably well under the ANP-led government. Deposits have doubled from Rs21 billion at the close of 2007 to Rs42 billion towards the end of 2011. Profits have more than quadrupled from Rs213 million in 2007 to Rs872 million in 2011. The bank had a total asset base of Rs72 billion at the end of September 2011.
The pace of expansion continues to increase dramatically over the past three years and continues to accelerate. The bank opened nine branches in 2009, 10 in 2010, 11 in 2011 and is now planning to open 16 in 2012.
“The new branches are being opened on niche basis, and about 10 of these will be Islamic branches, while six will be conventional banking branches,” said the CEO.
Going forward, the bank’s management plans to attract more fee-based revenue to become less reliant on interest rate risks. A key feature that the bank will be targeting will be the remittance market, which grew 23% over the first eight months of the fiscal year 2012 to $8.5 billion.
“We are trying to bring home the Khyber-Pakhtunkhwa portion of remittances by expatriate Pakistanis, which are about 30% of the total,” said Mustafa.
The Bank of Khyber has a unique advantage that many other banks would lack: because of its public mandate, it has branches in parts of the country that are very frequently not served by any other bank, offering convenient remittance recovery to many of its clients.
The bank appears to have come a long way from the time that it needed a bailout from both the federal and provincial governments to the tune of Rs3 billion. Bilal Mustafa said that the bank was on track to repay that loan over five years.
Given the strong growth and attractive assets of the bank, the Khyber-Pakhtunkhwa had made the decision to privatise the bank, selling a significant stake and management control of the bank to a private entity while retaining a 51% share in the bank.
Ismail Industries – more commonly known as the folks who own the Candyland brand of confectionaries – have bid for the bank, but the process has been halted after the Peshawar High Court issue a stay order on the process in response to a populist petition.
It is unclear whether the petitioner has alleged any actual wrongdoing on the part of the Khyber-Pakhtunkhwa government, since most of the hearings appear to be about justifying the very concept of privatisation.
CEO Bilal Mustafa refused to comment on the matter, claiming it was none of the management’s business and was an affair to be resolved by the owners. He also said that it would be inappropriate to comment on a matter that is currently in court.
The bank’s stock closed trading on the Karachi Stock Exchange at Rs7.25 per share, up 34.3% since the beginning of the year.
Published in The Express Tribune, March 28th, 2012.