Road to recovery: Bank of Punjab vows to meet all capital requirements

Monday, December 8th, 2014 8:42:55 by

LAHORE: Bank of Punjab (BoP) President Naeemuddin Khan has stated that the bank is committed to meeting all future minimum capital requirements through its own resources instead of issuing right shares.

BoP has come a long way from the capital adequacy ratio (CAR) of 3.87% in December 2009 to 10.01% in September 2014. It also managed to increase investments from Rs25.67 billion in December 2008 to Rs144.81 billion in September 2014, Khan said while talking to the media here on Monday.

Paid up capital (net of losses) was Rs5.5 billion in December 2009, which further dropped to Rs2.9 billion in December 2010. However, by September 2014 it had surged to Rs14.5 billion, much above the minimum capital requirement of the State Bank.

Khan acknowledged that it was possible due to an injection of equity by the Punjab government.

“We are now in a position to recommend to the board of directors in the next meeting to consider paying dividends to shareholders after a lapse of almost seven years. The bank’s difficult time has come to an end after relentless efforts of its staff,” he said.

“Six years ago, the bank experienced a chaotic time due to poor lending practices carried out on political grounds.” Non-performing loans (NPLs) of the bank swelled to Rs77.34 billion by the end of December 2009.

Khan said all loans were approved before the takeover of the new management. “We have recovered Rs55 billion in the past six years but in spite of that NPLs are still high.

That was not because of the lack of efforts on the part of the bank, he said, adding they had filed cases in courts, registered FIRs against defaulters and filed complaints with the National Accountability Bureau for the recovery of loans. Courts have granted stay orders on loans worth Rs40 billion.

“We have recently recovered Rs900 million from Dubai-based Harris Steel and another Rs500 million has been recovered from the same entity in December.”

According to Khan, deposits of the bank have increased from Rs164.07 billion in December 2008 to Rs327.24 billion in September 2014. On the other hand, the cost of deposits has fallen sharply from 10.89% in December 2008 to 6.85% in September 2014.

“We have improved the quality of our deposits by increasing the zero-cost current account and low-cost savings account deposits,” he added.

Khan said the investment portfolio had similarly improved. In 2008, 53% of investments made by the bank were in mutual funds and only 30% in government securities. By September 2014, government securities accounted for 96% of the Rs144.81 billion investments while term finance certificates and mutual funds accounted for 2% each.

Published in The Express Tribune, December 9th,  2014.

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