we conducted this research for our course Analysis of Pakistani Industry. this research was conducted to find out growth and performance of banking sector of Pakistan.

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Group Member:
Muhammad Ali (17002)
Sandeep Kumar (20395)
Ramsha Khatri (17013)
Amna Azim Ansari (20385)
MuhammadAsim Ikram (17890)
Submitted to:
Sir Zubair Choudhury

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LETTER OF ACKNOWLEGEMENT
First, We would like to express my utmost gratitude to Almighty GOD, the benevolent and
merciful, who blessed us with strength, courage and attributes such as hard work to complete
this term report in due time.
Secondly, we would like to thank our instructor Sir Muhammad Zubair, because of his
continuous support and guidance we successfully completed the report on the Banking Sector
of Pakistan.

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LETTER OF TRANSMITTAL
Institute of Business Management
Korangi Creek, Karachi-75190, Pakistan
UAN (9221)111-002-004, Fax: (9221) 509-0968
Dear Reader,
It is an honor for us to prepare a report on the Bank Sector of Pakistan, which was assigned by
our respected teacher Sir Muhammad Zubair. We would like to thank him for guiding us
throughout the course time period, which helped us a lot in materializing our knowledge.
It was a pleasure working on this report; it proved to be informative and insightful.
Yours Sincerely,
Muhammad Ali
Sandeep Kumar
Ramsha Khatri
Amna Azam Ansari
Muhammad Asim Ikram

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Table of Contents
Introduction...............................................................................................................................5
Background...............................................................................................................................5
Survey Objective......................................................................................................................6
Sample Size..............................................................................................................................6
Methodology............................................................................................................................6
Major Functions of Banks........................................................................................................6
Categories of Banking Sector...................................................................................................7
Explanation of Study................................................................................................................7
Results and Findings (Graphs)..................................................................................................8
 Performance...........................................................................................................8
 Growth...................................................................................................................9
Benefits of Banking Sector.....................................................................................................10
Banks Improves Economy in Following Ways......................................................................10
Recommendations...................................................................................................................11
Questionnaire..........................................................................................................................12

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INTRODUCTION:
Banking in Pakistan was first formally started in Pakistan during the period of
British colonialism in the South Asia. After independence from British Raj in 1947, and the
emergence of Pakistan as a country in the globe, the scope of banking in Pakistan has been
increasing and expanding continuously. Pakistan's oldest bank is the State Bank of Pakistan,
which is also the central bank of the nation. A robust banking sector is a healthy sign for the
economy of a country. It is this sector that plays the role of financial intermediation between
savers and investors, which actually determine the rate of economic growth. The banking sector
plays a critical role in mobilization of savings from households from across the country and
placing them at the disposal of entrepreneurs. Banking sector accounts for around three-fourth
of Pakistan’s financial sector. Only 7% of the population uses the banks, has tremendous
potential, but this needs to be pushed a little further.
Banking sector is one of the fastest growing business fields in Pakistan. They give you lots of
opportunities to grow. Banking sector has a job for candidates from almost every field of
education including finance, engineering, software, marketing, technology, etc. It has a job for
various qualifications including graduate, post-graduate, 10th pass, 12th pass, diploma, etc.
Banking jobs give you a chance to interact with people and to know the financial and economic
status of your country. Banking job is secure and provides you stability. Salary and other
benefits are better than private industries. Banking job doesn’t cause as much stress and tension
as a private job does. Since job timing is fixed, you can give enough time to other important
thing including your family.
BACKGROUND:
The Pakistan banking industry constitutes a total of around 31 banks, of which five are public-
sector and four are foreign, while there are 22 local private banks. The majority of the banking
business is concentrated in a select few in the industry—six banks are the largest competitors
in the economy and hold a major stake of the banking assets in Pakistan. To be more specific,
these banks collectively make up more than 57 percent of deposits and 53 percent of advance
in the economy. They are:
 Habib Bank Limited (HBL),
 National Bank Limited (NBL),
 United Bank Limited (UBL),
 MCB Bank Limited,
 Allied Bank Limited (ABL)
 Bank Alfalah Limited.
The industry is regulated by the State Bank of Pakistan (SBP), which governs local banks under
the ambit of its prudential regulations. Moreover, the banks also must comply with the
international Basel III standards. Overall, the potential in this sector is huge. The number of
bank accounts amounts to 43 million in a total population of 195 million. The reasons behind
this large difference can be credited to the limited access to technology in the country, the
aversion to banks due to religious reasons and the great size of the unbanked rural population.

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SURVEY OBJECTIVE:
The objective of the bank sector survey was to provide important data to better understand the
industry. Specifically, the survey sought to:
 Gain information about the growth of the Banking Sector.
 Gain information about the performance of the Banking Sector.
SAMPLE SIZE:
The sample size of our research is 25 public and private banks.
METHODOLOGY:
In order to find out whether the banking sector is under monopoly or perfect competition, we
used two methods, C4 and Herfindahl-Hirschman Index (HHI). The results of both
methods are:
C4:
Banks 2016 % 2017 %
National Bank of Pakistan 114,402,671 12% 123,072,600 13%
Habib Bank Limited 141,089,244 15% 148,010,269 16%
United Bank Limited 98,219,214 10% 107,205,820 11%
Allied Bank Limited 64,592,588 7% 65,608,757 7%
Total 418,303,717 43% 443,897,446 47%
In C4 if percentage is near 0 than the industry has perfect competition and if percentage lies
near the 100% than industry has monopoly. We can interprets from percentage that bank
industry is under perfect competition because its percentage lies near 0% and below 50%.
In HHI, the percentage of 2016 is 797 and percentage of 2017 is 818 We can interprets from
percentage that bank industry is under perfect competition because if percentage square is
near 0 than the industry has perfect competition and if percentage square lies near the 10,000
than industry has monopoly
MAJOR FUNCTIONS OF BANKS

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CATEGORIES OF PAKISTAN’S BANKING SECTOR:
Category Description
State Banks of Pakistan Central Bank and the Autonomous and
Governing Body for all banking operations in
the country.
Nationalized Scheduled Banks These deal primarily in industries of banking
andcapital markets. They offer a host of unique
policies, banking training, services and products
which include loans, credit cards, savings and
Consumer banking.
Private Scheduled Banks Banks engage in channeling funds from
depositors
to lenders against the primary objective of acqui
ring profit i.e. Bank Spread.
Foreign Banks These concentrate primarily on International
Trade Finance, Innovative Credit Orientation
and Plastic Money.
Investment Banks Investment Banks act as underwriter or agent
serving as intermediary between an issuer of
securities and the investing public.
Specialized Banks These banks are created with specific interest
thus specializing and catering to a particular
sector industry.
EXPLANATION OF STUDY:
Financial sector of any country is always the greater than any of other sector. This is because
all the sectors use the financial sector to aid in their transactions. Likewise, the banking sector
in Pakistan is the sector which covers the large area of operations such as; SMEs, Consumer
financing, Personal financing and other. For our course “Analysis of Pakistan Industry”, We
sought to carry the research on Growth and performance of Banking sector of Pakistan.
We extracted the information related to these two areas by filling out the questionnaire from
the top and mid-executives of different 25 banks operating in Pakistan. Some of these banks
were international, public as well as private.
We used Likert scale, which ranged from strongly agreeing to a question to strongly
disagreeing to that question.

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RESULTS AND FINDINGS:
PERFORMANCE:
We asked the respondents that, do they think that the profit margin of their bank was greater
than the profit margin of other banks? This question was aimed at extracting the fact that
whether their bank is profitable or not? To this question, 7.7% of respondents were strongly
agreeing and 46.2% of them agreed to it. Whereas, 7.7% strongly disagreed and 26.9%,
strongly disagreed while 11.5% remained neutral. This showed that, the majority of Banks here
in Pakistan earn higher profit.
26.9% and 7.7% of those disagreeing and strongly disagreeing, respectively; said that they do
not earn high profit because they say that the state bank of Pakistan makes sure that the welfare
of consumers does not come to an end. The main motive of banking sector is to earn money,
therefore if they are left free, then there are chances that they will start to charge more interest
rate to increase their profit, while the welfare of state will perish than.
Our second question revealed that, the majority of our respondent believes that, performance
of Banking sector has suffered due to the poor economic condition of Pakistan. 57.7% of them
agreed to this, 26.9 disagreed to this. This shows that, the political and economic instability in
Pakistan has severe effects on the performance of our banking sector, because this sector is
totally dependent of other sectors, therefore if other sectors will perish, our banking sector will
also suffer.
30%
13%
48%
9%
High Profit Margin
strongly disagee
disagee
neutral
agee
strongly agree
4%
61%
35%
Incease in Equity
strongly disagree
disagee
neutral
agree
strongly agree
9%
66%
25%
Increase in
Infrastuctue
strongly disagree
disagee
neutral
agree
strongly agree
7%
76%
17%
Increase in Assets
strongly disagree
disagee
neutral
agree
strongly agree

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The majority of Respondents with 38.5% believed that government plays an important role in
Banking sector, while the 2nd large chunk believed that the role of government in Banking
sector is not prominent.
Another question stated that, the strict interventions hinder the performance of Banking sector.
50% of respondents agreed to this whereas, 30.8% disagreed. Therefore, it was proved that the
strict interventions from State bank of Pakistan intervene their operations. If we look more
closely, The Banking sector of any country, runs of the element of Faith. Once It’s lost, the
individuals will not believe banks enough to keep their earning. Therefore, if one bank collapse,
the other banks in that country will start to collapse because the people will start to withdraw
their precious earnings from them. Hence the economy will start to suffer from there and it
might lead to recession. Therefore, SBP, as the regulatory authority makes sure that user’s faith
is maintained and that banks do not go bankrupt and for doing it, SBP has given the guidelines
to each bank which they have to follow.
Since the status quo of Pakistan is not impressible and is at risk. Instead of decrease in deposits
at Banks, there is an increase in the deposits and that was proved by the majority of
Respondents saying that the political and economic turmoil of Pakistan has not affected their
deposits.
Another of our questionnaire asked the respondents regarding the benefit of Government
welfare initiatives on Banks, the majority of respondents were neutral at this question and 2nd
majority was secured by those agreeing to this while 26.9% of them disagreed. Benazir income
support program was said to have a good benefit to the banking sector, because this welfare
included the money and the beneficiaries were said to open accounts and were given Debit
cards which they can use at ATMs.
GROWTH:
Our questionnaire contained a separate section to examine the growth of Banking sector. We
asked the respondents that whether the equity of their banks has increased over the period of
time or not? 53.8% of respondents agreed to that, while 38.5% strongly agreed. This is because,
it is one of the requirement laid by State bank of Pakistan, that each bank operating in Pakistan
has to increase the equity. This is done in order to save banks from going bankrupt because if
a bank would have enough equity, then at the time of recession, it can save itself from taking
money from the equity rather than calling back the loans.
Moreover, because of some fact, State bank of Pakistan knows that it is most undesirable act
for banks to put their earning as equity. Therefore, it is mandatory for each of these banks to
increase their equity over the period of Time.
Moreover, the Banks operating in Pakistan are also increasing their Infrastructure in terms of
Opening new branches as well as ATMs. This is done in order to increase the accessibility in
urban and rural areas. As accessibility in urban areas has remained the most common issue in
banking sector of Pakistan, Therefore, State bank of Pakistan has made it mandatory for banks
to open at least 20% of their new branches in villages.
Furthermore, we asked banks regarding their Net investments and 57.7% of them agreed that
their net investments have increased over the period of time, whereas; 23.1% of them were
neutral.

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BENEFITS AND IMPACTS OF BANKING SECTOR:
Banking sector is the most important sector as it stabilizes the financial system of a country.
Banking industry is a service industry. It gives different benefits to its employees including
medical benefits, sick leave, you get vacations. Banking firms are safe to work and provides a
pleasant environment and excellent working conditions to its employees. It also provides a
good salary package to its employees. People who work in banks are well organized and are
expert in using computers. Banking sector plays an important role in the economy of our
country. It makes sure that financial resources are being efficiently used and are promoting
towards the development and growth of economy. As a key segment of the budgetary
framework, banks designate assets from savers to borrowers in an effective way. Pakistani
banks are taking part in new projects which will help the banks increase its revenue. Banks
have a major share in the development projects under China Pakistan Economic Corridor
which will help them to generate more revenue in the future. If the economy of a country
have a robust banking sector, it’s a healthy sign for that company’s economy. Savers and
Investors are main in this sector and banks play a major role of financial intermediaries
between these two, which determines the rate of economic growth in a way. Three fourth of
Pakistan’s financial sector is covered by banking sector. To improve the quality of assets,
stable liquidity, robust solvency and slow pick-up in private sector advances were the key
developments during the last quarter of CY17 according to the central bank’s quarterly
performance review of the sector. The asset base of the sector was increased by 4.5 % during
the quarter. There was a great demand from textile and cement sectors which actually
improved the gross advances to private sector by 7.3% on a quarterly basis and 16.4% on
yearly basis.
If we had no banks in a country:
 Where you would go to obtain cash?
 What would you do with your reserved funds?
 What dangers would you face as a borrower?
Those people who are in need of money and those who require money, banks act as an
intermediary between them. Banks operate using receipts and cheques in place of money
which helps in business transactions. Different sectors promote banking sector development
including agricultural sector and industrial sector.
BANKS IMPROVE THE ECONOMY IN THE FOLLOWING
WAYS:
 Halfway financing undertaking which can be reimbursed in longer period which would
make benefits by giving immediate or roundabout work to numerous individuals.
 Banks give benefits to different manufacturers and many business men which play a very
important role in shaping the economy. Banks can follow the cash inflow/outflow to
different nations which would help the nation of origin in different ways.
 Banks give OD and term credit to businessperson which is extra favorable position in
extending their business.

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 Banks can follow the cash inflow/outflow to different nations which would help the
nation of origin in different ways.
 Banks give home advances, understudy advances and credits to nationals by which they
can satisfy their needs and dreams which play a vital role in pushing the GDP and outside
inflows in later stage to higher levels.
They are numerous way banks assume an imperative job in forming the economy. An
excessive amount of capacity to bank can harm the framework and society. National Bank
of any nation ought to be extremely solid.
RECOMMENDATIONS:
 The banks should improve their capital base and maintain adequate capital adequacy
ratio, lower the ratio more the performance of the banks.
 The bank should decrease their nonperforming loan in order to improve their asset quality
and limiting the loan outstanding.
 The administration of the bank should manage the cost of the bank, and the cost to
income ratio should be in a reasonable range. The administration of the bank should pay
more consideration of its cost, and make sure the costs of the bank are utilized in the
sensible way.
 The bank should increase their net profit and improve their net interest margin, and
maximize the income of loan product.
 The bank should try to get more deposits and keep the right amount of liquid assets to
increase its liquidity.
 For asset quality, banks need to enhance their procedures for screening, credit clients and
observing of credit danger.

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QUESTIONNAIRE:
QUESTIONS SD D N A SA
PERFORMANCE
1 Profit Margin of our Bank is Higher than other banks in
Pakistan
2 Government Plays a Strong role in Bank Sector of
Pakistan
3 Performance of Banking sector has suffered due to the
poor economic conditions of Pakistan
4 Strict interventions from higher authorities hinders our
performance
5 Deposits at our bank has suffered due to poor condition
of economy in last few months
6 Government welfare initiatives has increased the
business our Banking sector in recent years
GROWTH
1 Equity of our bank has increased over last 5 years
2 Our Bank has also increased the infrastructure in terms
of opening new Branches and ATMs
3 Net Investments of our bank exceeds it’s last year
investments
4 Assets of our Bank has increased as compared to last
year
5 Deposits at our bank has suffered due to poor condition
of economy in last few months
6 Consumer Financing has remained the greater source of
income for our bank
7 Public sector banks are expanding more rapidly than
Private and Foreign banks
We are the Students of Institute of Business Management (IoBM). This questionnaire is the requirement
of our Course; Analysis of Pakistan Industries. We, therefore request you to spare few minutes filling this
questionnaire. All Information provided through this will be kept utterly confidential.
Mark the degree of your agreeableness according the question.
SD = Strongly Disagree, D = Disagree, N = Neutral, A = Agree, SA = Strongly Agree

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