NBP: Waking up to technology

Technological up-gradation, product innovation and cost efficiency are the key ingredients to a healthy, profitable organization. Without a shadow of doubt, this recipe for success has helped the giant local banks to quench customers and investors appetite. Four out of the five giant banks: MCB, ABL, UBL and HBL, have cumulatively recorded 31 percent, year-on-year, growth in their bottom-line in 1HCY11. However, during the same period NBPs stale bottom-line growth of a wimpy 3 percent, is symptomatic of slower adoption of cost efficiency and business development measures. So far, NBP has lagged behind the other big banks in bringing its branches online as 507 NBP branches are online out of a total of 1266 branches, while the other large players such as MCB, HBL and UBL have already brought all their branches online. Out of the total 9,541 branches industry-wide, nearly 7,416 branches were online as of 30 June, 2011. However, lately, the initiative taken by NBP to expand its online network to 1000 branches by the end of CY11 is one big step taken by the management, in the right direction. Being a state-owned organization which maintains a large presence in rural areas, the technological advancement at slower pace seems partially justifiable. However, it is also true that the organization has been woefully loathe to technology-driven processes. "At the moment 78 percent of all branches are online in Pakistan. But infrastructural and technological skills of staff working at branches located in rural areas of Pakistan makes it difficult for banks to completely convert all of their branches. While we do not have any exact time frame for the conversion of all the bank branches on-line, it is expected to happen within next few years, an SBP official told BR Research. However, the technological advancement alone would not help in bringing the banks margins at par with private banks, thus, stressing the need to raise its game to eliminate inefficiencies which appear inherent in state organizations. The bank is overburdened with staff, resulting in high administration expenses. NBPs total administration expense per branch was nearly twice that of MCB in CY10. Moreover, the banks NPL grew faster than most other big banks during the past one and half years. As a result, the banks infection ratio stood at 19 percent at the end of June, 2011, as opposed to the other four giant banks average of 11 percent. The banks deposit base accounted for 15 percent of the total deposit base in all commercial banks as of 30th June, 2011. Given the fact that NBP has the largest deposit base in the country along with a strong presence in rural areas; improvements in the quality of service and better management can help it knock the spots off other players in the industry. But to do that, NBP has to ensure that its drive to automate gathers pace, not dust.