The Quest of Profitability By The Nationwide Banks

In view of the current business scenario, the quest of the profitability by most of the banks in the country is taking a new turn, and it seems to be in quite right direction.

It has been shown that, in the first half of the 2013, most to the banks have increased their profits through non interest income, and many of the banks have increased their incomes remarkably. In the past it has been shown that most of the banks used to invest in government shares as compared to the provision of credit to the private sector. This way they compensated the less lending to the private sector.

With due aim of the banks to make profits at their best, the bank deposits have been increased to 9.5 per cent as compared to the 4.1 percent which was noted for the last year. Many of the banks noticed that their interest income was not satisfactory therefore they started earning non interest income through investing in advisory, brokerage and the custodian services.

 The Quest of Profitability By The Nationwide Banks

All Banks Nationwide

Many of the banks including National Bank of Pakistan, United Bank Limited and Bank Alfalah are trying their best to increase profitability and they have achieved their targets to a large extent. Records showed that in the first half of the current year, the non interest income of UBL has been increase by 31 per cent however the non interest income of the Bank Alfalah has been increased by 26 per cent. In an environment where the interest rate is low, banks have the only solution to increase their profitability by the non interest income. The five major local banks includes, Allied bank, Habib bank Limited, Muslim Commercial Bank, National Bank of Pakistan and United bank Limited.

It has been noticed that for the last few years the banks have been investing in the government papers, this thing also continued in the year 2013. The investment of the banks in the government would have been lowered if the government has not cleared debt of the 500 billion PKR in the month of May-June. According to the bankers, the second half of the year is going to be more challenging as compared to the same period last year, and they also say that these challenges would have different aspects.

 The Quest of Profitability By The Nationwide Banks

Important Aspects

One of the most important things to be mentioned is that, there seems aspect that the government would increase its borrowing as it did in the past. The reason behind is that the tax revenue is increasing and a large inflow of the foreign credit is also increasing. Another aspect for this is there is a large scale borrowing from the International Monetary Fund, which is about to come in. However in the other way the industries are growing on the other hand and it is also said that large scale projects are also going to be initiated.

Given all the above reason it is evident that there would be a high demand for the private sector credit. The decision would be taken by the banks keeping in view the profitability conditions.

Irrespective of financial environment in the country, and the way monetary policy is moving, in case if the banks are really interested in making their profitability, they have to consider both the ways  of making through interest based and non interest incomes. Banks have to keep an eye on both private and the public sectors demands, this is the way banks can only have the sustainable profits.

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