President & Chief Executive Officer, Askari Bank

Profile:

Syed M. Husaini

President & Chief Executive Officer, Askari Bank

Syed M. Husaini joined Askari Bank as President and Chief Executive Officer on June 03, 2013. Mr. Husaini is a Masters in Economics & International Finance, along with professional certification by the National Association of Securities Dealers, USA and North American Securities Administrators Association. His other major assignments in Pakistan include President KASB Bank, CEO of a Modaraba and Head of Corporate Banking Group, MCB, and Executive Vice President at the National Bank of Pakistan. Another intellectual dimension of his career has been his association with training. He has been a visiting faculty member at the training centers of BCCI, MCB and Askari Bank.

Blurb: 

Expanding branch network is a key contributing factor towards the high deposit growth and we will continue to play our role towards promoting financial inclusion in the country.

Evolve: How did you find 2015 for the banking sector and what will be your strategy in 2016?

Syed M. Husaini: Generally, banks are fairly prosperous institutions in Pakistan, and have done consistently well. The year 2015 has been a good year for large and mid-tier banks in terms of revenue and profitability. However, the volume of income coming from core business has been a matter of debate. Private sector credit may not have grown by the desired level, and some analysts have pointed out that banks have largely relied on government bonds for generating revenue. Nevertheless, commercial banks have shown growth in assets, deposits, and branch network.  Banks are a great vehicle for generating economic activity by the very fact that they expand branches on a yearly basis, create gainful employment and spur construction activity.

Compared to 2015, the year 2016 may not be a very rewarding one for banks, unless they begin to widen their revenue base and look for other business avenues like consumer credit, trade finance, extension of credit to SME sector and supporting the government in infrastructure development. Askari may adopt a similar strategy.

Evolve: How do you gauge emerging economic conditions in terms of opportunities and challenges for the banking sector? Will this be a tough year for banks?

Syed M. Husaini: The year 2016 will not be an easy year for banks. As mentioned earlier, declining yields on government bonds will impel banks to enhance private sector credit. Emerging economic conditions will definitely depend on the government's initiatives regarding energy, privatization of public sector entities and economic policies geared towards the support of the export sector.

Yes, the focus on Pak-China corridor and cooperation between the two countries in terms of developing infrastructure will provide great thrust to economic activity, and I am sure that banks will be standing by to grab this business opportunity.

Evolve: There are many underserved urban and rural areas. How is your bank planning to address that void? Will you like to share your 2016 expansion plan?

Syed M. Husaini: Askari Bank is expanding its branch network by adding hundred (100) branches in 2015, which is a record growth. We need to develop our outreach to ensure that we cater to all segments of our society.

By the end of 2015, we will have about 425 branches. It is likely that we will add another 75 branches in 2016 and make it a total of 500. This network of branches will be spread over urban and rural areas throughout Pakistan.

Evolve: We are an agricultural economy yet if you look at farmers, there is hardly any access available for financing. Do you have any plans for agriculture sector?

Syed M. Husaini: I agree. The agricultural sector has been a neglected sector, and banks have shied away from extending credit to this important segment of our economy. However, you need to evaluate this shortcoming keeping in view several factors.

Agriculture is a vulnerable sector where output is dependent on numerous unknowns like weather, floods, pests etc. Banks, by nature, exercise caution while extending loans and seek to ensure a safe recovery of the loans extended. At times, the collateral also becomes an important impediment since farmers have no tangible assets to collateralize the loans. It is therefore necessary that the state plays a role in devising 

Agri.- friendly policies to encourage banks to extend easy credit to this sector.

Evolve: Is the local banking system geared up to finance upcoming energy projects like LNG?

Syed M. Husaini: The banking sector in Pakistan has always been on the forefront of supporting infrastructural projects, and especially energy projects. Local banks have been the main source of financing for the development of energy projects, be they thermal power projects or, of late, wind power projects. Similarly, they have always supported state owned gas companies in their annual and five-year infrastructure projects. Banks are well aware of the country’s energy needs and have been engaged with a number of stakeholders in the LNG value chain. From financing the private LNG terminal, to agreeing to SBLC’s requirements of IPPs, banks have actively looked at various legs of this infrastructural development. In recent ministerial level discussions, banks have shown their commitment to finance the broader infrastructural requirements for LNG projects. They are also geared up to finance numerous projects of national importance, like the Thar coal-mining project and the integrated power plant and Dasu Dam, and are also considering part financing of the Neelum Jhelum power project, while also being engaged with NTDC to provide financing on a timely basis for power evacuation infrastructure and grid availability for several upcoming power projects.

Evolve: How much have you been investing in technology?

Syed M. Husaini: We firmly believe that investment in technology is critical to the growth of any financial institution, especially the size of a bank like ours, with a wide array of products. Our technology platform is excellent and we provide high quality customer service at the doorstep of the customer. Branchless banking is the next-generation level of banking, which leads to greater financial inclusion of our population. This will definitely lead to efficiency, largely in the agricultural sector. Askari Bank has developed a branchless banking platform, which we intend to enhance.

Evolve: In early 2000s, banks were giving loans heavily. We are again entering in similar market conditions. How do you see the banking sector responding to the situation this time around?

Syed M. Husaini: In the recent past, banks have been investing in government bonds because of high yields. As such, banks have shied away from   private sector credit, which appears relatively more risk oriented. The government and financial analysts have time and again expressed concern that banks are not supporting the private sector in building up their manufacturing and trade finance activities. Keeping this in view, the government has consistently lowered the interest rate on government bonds to discourage investment in government securities and divert funds into the productive private sector. Since yields on government securities have lessened significantly, it impels the banks to look for other avenues to generate income. Private sector credit has not expanded to the desired level on various counts. The economy in various sectors has slowed down on account of energy shortfall and lower commodity prices. Moreover, because of   high bad debts and stuck up loans, banks have begun to exercise caution with the private sector. Hence, despite the decline in interest rates of government securities, we fail to see any substantial increase in private sector credit. It is important that energy shortfalls are made good, and the government reviews laws with respect to recovery of bad loans. Once the banks are confident that effective and stringent recovery laws are in place, we are bound to see a liberal attitude of banks towards expansion of private sector credit, especially mortgage finance.

Evolve: Where do you see growth rate and interest rates going from here?

Syed M. Husaini: The growth rate is not expected to rise beyond projections on account of energy shortages and a slowdown in the agri-economy due to depressed prices as well as global economic activity. LSM, being the major contributor, missed its growth target and the reduction in exports-value due to fall in commodity prices. Interest rates may have a maximum room of 50 to 100 basis cut, but it is in an extremely vulnerable zone as reversal can be quick and steep. However, the levels appear assured as international oil and commodity prices are expected to stay depressed. Interest rates are expected to maintain their current level, which would be crucial to boost economic activity. We may see reversal in rates late 2016 in the event of growth and development in the economy.

Evolve: Can banks attain the 4.5 percent gross spread as proposed by the State Bank of Pakistan?

Syed M. Husaini: For banks to attain the gross spread target seems difficult as PIB yield is in a high risk (political/geopolitical) domain and the target rate has further squeezed volatility and credit margins. 4.5% spread maybe a bit optimistic for mid-tier banks, given their book size. Banks may need to shift towards higher yielding advances, given economic recovery to keep spreads intact amid low interest rate scenario.

Evolve: How did the bank’s deposits evolve in the outgoing year and what is going to be your strategy going forward?

Syed M. Husaini: Askari Bank has done exceedingly well in the area of customer deposits on the back of a strong brand, a wide range of products to suit the banking needs of our diverse client segment and an expanding branch network. At June 30, 2015, our customer deposits were reported at Rs.422 billion and within the deposit categories, current accounts registered a healthy growth of 23%. We recognize that the expanding branch network is a key contributing factor towards the high deposit growth. Also, our strategic focus remains on promoting savings. As a nation, we continue to be categorized as low-saver amongst the regional peers. To this end, we add new and improved offerings to our suite of products and services-certain new products are currently in process and will be launched soon. We will continue to expand our core deposit base and will continue to play our role towards promoting financial inclusion in the country.

Evolve: Any message for the readers of EVOLVE?

Syed M. Husaini: We are pleased to know that EVOLVE is evolving into a great magazine. We are sure that its readership will grow at a fast pace. My message to the readers would be to make sure that they get a copy of every publication, which will definitely enhance their knowledge base on Pakistan’s economy and the country’s general social conditions. Askari Bank is a premium services bank and we invite all EVOLVE readers to utilize the services of Askari Bank, which has a large network of branches and a wide array of financial services.