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Burj Bank Limited

Burj Bank Limited was formerly known as Dawood Islamic Bank Limited (DIBL). The bank received its license from the State Bank of Pakistan in May 2006 and officially commenced operations in April 2007. In July 2011, the bank was renamed Burj Bank Ltd.

The bank is the result of an initiative of the First Dawood Group who teamed up with Islamic Corporation for the Development of the Private Sector (ICD) Jeddah, Unicorn Investment Bank - Bahrain, Al Safat Investment Company - Kuwait, Gargash Enterprises (LLC) - Dubai, Azam Essof Kolia - a Singapore-based entrepreneur and Shaikh Abdullah Mohammad Al-Romaizan, an entrepreneur from Saudi Arabia.

Burj Bank has a diversified range of Shariah compliant funded and non-funded products and services aimed at facilitating both individual and corporate customers. Besides, the bank also offers investment and corporate advisory services. Burj Bank was quoted the best Islamic bank by world financial magazine in 2013.

Financial snapshot, 1QCY13 During the first quarter of CY13 when the conventional banks were struggling in the face of declining rates, Burj Bank made greater feat by boasting a top line growth of 43 percent year-on-year. However, the tremendous growth in top line was soon faded away by a massive 64 percent year-on-year growth in expense on deposits that took its spread ratio down to 21 percent in 1QCY13 from 31 percent in 1QCY12.

The real jolt to the bottom line, however, came from a rise in provisioning expenses which grew from Rs 17 million in 1QCY12 to over Rs 134million in 1QCY13, translating into a growth of 674 percent. This is despite the fact that the bank availed the relaxation provided by SBP in booking provisions. Had the bank not availed this facility, the loss before taxation and the provision expense would have been higher by Rs 113.933 million.

During the period, the bank made the most of the boom in the capital market and made 124 percent growth in the other income. However, capital market performance are not the only factor triggered the other income cadre, fee, commission and brokerage income and income from dealing in foreign currencies also lent a due hand.

The establishment of 25 new branches during the period took up the bank's branch network to 75 branches and propelled the collection of low-cost deposits which will be a good omen for the bank going forward. However, as is said, there are no free lunches; the additional branches pushed up the operating by 82 percent year-on-year.

1QCY13 was sluggish for the bank as its financing fell by 10 percent during the period which took ADR down by almost nine percent while IDR grew from 48 percent in December 2012 to 49 percent in March 2013.

Performance recap (CY11-CY12) After incurring losses for three consecutive years since CY09, CY12 was the year when the bank made an after tax profit of Rs 84.6 million. This was achieved while growing the balance sheet size, managing cost of deposits, improving operational efficiencies and without compromising on asset quality.

During the year Burj's financing grew by a staggering 88 percent year-on-year taking bank's ADR to 65 percent in CY12 from 61 percent in CY11. During the year, their consumer product 'CarSaaz' emerged as the market leader in auto financing. In 2012, Burj Bank become a dominant player in fleet financing business and is regarded as a top player in this segment.

Another key venture by the bank during the year was the establishment of SME banking division in January 2012. As also emphasised by the SBP, Bank has focused on launching agri-products through its SME banking arm. In line with its objective, during the year, bank launched the Pakistan's first Islamic agricultural financing product.

NPLs, however, remained almost constant but fresh lending placed down the infection ratio to four percent in CY12 from eight percent in CY11. Apart from underwriting quality credits, the bank has concentrated profoundly on the recovery from nonperforming financings and investments. During the year, the recovery of non-performing financings amounted to Rs 340.7 million and recovery against classified investments stood at Rs 79 million.

During the year, the bank launched 'feet on street' model in its retail branches. This model is aimed at generating low-cost current and savings account deposits and at the same time increasing new customer acquisitions. Resultantly, low-cost deposits grew by 76 percent year-on-year. However, CASA remains constant. High return expensed on deposits and short-term musharakah/mudarabah funds plopped down the bank's spread ratio drastically.

During the year, coverage ratio has dropped from 79 percent to 69 percent mainly due to reversal of general provisioning of Rs 180million as the bank holds significant collateral against the classified financings. Other income continued to lend a helping hand to the bottom line by registering 142 percent year-on-year growth in CY12.

Future outlook With the most recent cut of 50 basis points in the discount rate, further reduction in bank spreads is on the cards. Talking specifically about Islamic banks, a huge fissure remains in the market due to lack of Islamic money market instruments and inaccessibility to SBP discount window facility.

This not only creates asset-liability gap but also leaves Islamic banks with excess liquidity which has to be invested at lower rates. This impedes Islamic banks from going on any enthusiastic deposit mobilisation drives.

Industry insiders strongly urge the development of an active Islamic money market via short-term sovereign instruments and secondary market via Islamic repo agreements. Tri-party repo could be a proposed solution to combat the prohibition of buy-back agreements in Islam. Besides, Lender of Last Resort facility is also imperative to enable them manage their operations efficiently.

SBP has recently launched an industry-wide marketing campaign to boost the market share Islamic banks by clearing the misconceptions held by the masses about the Shariah compliant banking. Industry insiders appear quite confident that these strides would improve the share of Islamic banks. Besides, in the absence of short-term Islamic sovereign instruments, campaigns as such, would enable Islamic banks to develop unique financing products to effectively utilise their excess liquidity.

Copyright Business Recorder, 2013


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Foreign Debt $60.9bn
Per Cap Income $1,368
GDP Growth 3.6%
Average CPI 7.5%
Trade Balance $-1.558 bln
Exports $2.117 bln
Imports $3.675 bln
WeeklyJuly 10, 2014
Reserves $14.638 bln