By Naween A. Mangi, Bloomberg
Karachi: United Bank Ltd, Pakistan’s third-largest, will further expand outside its borders and may buy a bank in Central Asia, as it seeks to profit from rising trade and investment across regions.
By next year the bank plans to open two new branches in Qatar, one in Yemen and another in Mumbai, as well as an office in Shanghai, Atif R. Bokhari, chief executive officer, said in an interview at his Karachi head office on 15 March.
“It makes sense for us to take advantage of tripartite trade between India, Pakistan and the Middle East,” he said. “We will look at the possibility of acquiring a small or mid- sized bank in Kazakhstan or the surrounding areas to help diversify our revenue.”
The bank, which has $7 billion (Rs30,863 crore) in assets, wants to use Pakistan’s location at the crossroads of Central and South Asia and the Middle East to tap expanding business links between regions that have a total economic output of more than $2.5 trillion and 2.2 billion people, according to Bloomberg data.
United Bank aims for its international network to contribute as much as 30% of revenue and profit, said Bokhari, 49, who was appointed CEO in 2004 after four years at Habib Bank Ltd, the nation’s second-biggest bank. He previously spent 15 years at Bank of America.
In 2006, the bank’s 15 global branches in the United Arab Emirates, Qatar, Yemen and Bahrain accounted for 20% of profit and revenue, compared with 10% three years ago, he said. United Bank’s full-year profit rose 59% to Rs9.5 billion in 2006, according to its annual report, and loans climbed 21% to Rs247 billion.
The bank, which has 9,738 employees, also has a branch in New York and offices in Iran and Kazakhstan.
“United Bank has a substantial international franchise which is a major opportunity they can exploit and so far they have not,” said Nasim Beg, chief executive officer at Arif Habib Investments Ltd, in Karachi, which oversees the equivalent of $320 million in stocks and bonds.
United Bank, which had 1,059 domestic branches last year, plans to add 40 more this year, its first expansion in 15 years, and could open as many as 20 more local outlets by 2008 to capture rising demand for car loans and credit cards, Bokhari said.
Also the government will appoint financial advisers for United Bank’s overseas share sale within the next week, Bokhari said. Pakistan, which owns 44.5% of the bank, plans to sell a stake of 10% to 20%, he said.
Pakistan plans to sell shares overseas in three banks, including United Bank, by June 2007, Prime Minister Shaukat Aziz said 5 November, to help fund growing demand for credit. MCB Bank Ltd, the country’s second-biggest by market value, raised $150 million selling shares in London in October.
United Bank’s shares have climbed 39% this year, more than double the 13% rise in the benchmark stock index. They rose 3.4% to Rs170.75 at 11 am on the Karachi Stock Exchange.
The bank’s growth will stem mostly from consumer loans, which will account for 40% of assets in five years, led by personal loans and mortgages, Bokhari said. Consumer loans, which were started three years ago, amount to Rs47 billion, he said.
“The bank is also expanding geographically and most notably into Pakistan’s tier two cities,” Merrill Lynch & Co., which has a “buy” recommendation on the stock, said in a report on 15 February.
United Bank also expects corporate loan growth to rise in 2008, spurred by planned infrastructure and power projects, Bokhari said.
The bank will also join Abn Amro Holding NV, Citigroup Inc., and Standard Chartered Plc, in expanding its Islamic banking network. United Bank opened its first Islamic banking branch in Karachi in December and plans to start dedicated outlets in Sialkot, Peshawar, Lahore and Faisalabad this year, he said.
Assets held by banks that comply with Islamic law grew to Rs95 billion in the July-September quarter from Rs50.65 billion as of 30 June, according to data from the Karachi-based central bank on its Web site.
The State Bank of Pakistan wants the Islamic banking sector to account for 15 % of Pakistan’s total banking market over the next five years, central bank Governor Shamshad Akhtar said on 24 January. The industry currently makes up about 3% of the total, she said.
United Bank started an insurance company in February and plans to underwrite 600 million rupees in premiums this year. United was also the first bank to start an asset management company in 2002, which now oversees Rs10 billion in stocks and bonds, according to its Web site.
“We want to use our branch network not just to gather deposits but as distribution channels for all kinds of financial products,” Bokhari said.