Habib Bank looks to innovation for growth

A focus on customer experience to fend off competition

Habib Bank has undertaken several initiatives following its privatization in April 2015 to address changing customer needs and the challenges pose by a rapidly evolving technology and increasing competition from fintech companies

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15 Dec 2016

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Following the privatization exercise in April 2015 in what was the largest equity offering not just in Pakistan but in the Asian frontier markets, Habib Bank continues to be focussed on enhancing its processes and practices to international standards. The government sold a 41.5% stake in Habib Bank in a fully marketed secondary placement for US$1 billion, underpinned by the strong participation from international and domestic investors.

The bank attracted the International Finance Corporation (IFC) and the Commonwealth Development Corporation as anchor investors, and received participation from various global institutional investors. During the year, Habib Bank has also repositioned and reorganized its international business to bring out a more coherent and consistent focus on all aspects of its operations and ensure that its success in Pakistan is also reflected throughout its international network.

In 2015, Habib Bank achieved a new landmark by becoming the first bank in the country to cross the 100 billion rupee (US$945.5 million) in total revenue, while pre-tax profit surged 25% from the previous year to 60.3 billion rupees. The home remittances and investment banking businesses delivered excellent results, each crossing one billion rupees in income for the first time.

Over time, Habib Bank has improved its branch infrastructure, broadened its product offering and focused on customer experience. It has launched its women finance initiative called the HBL NISA programme in collaboration with the IFC. “The objective is to increase women financial inclusion to help advance and elevate women in Pakistan’s society,” says Habib Bank’s head of corporate and investment banking Aamir Irshad.

Habib Bank is leading the way in rural financing and is focused on continually expanding its asset base. In the past two years, it has achieved year-on-year asset growth of 20% in rural banking with a well-managed credit quality.

Another focus for the bank is to leverage appropriate technology to continuously digitize the flow of money across individuals, institutions and businesses. It wanted to build mobile-based solutions for various client segments, spending heavily on upgrading its internal systems as enhancing customer experience with digital innovation.

There is also a greater emphasis on Islamic banking, which is viewed as a growth area for the country. “Habib Bank has actively pursued the development and availability of Shariah-compliant products through its Islamic window operation and in a short span of time became the second largest Islamic banking provider in the country,” Irshad points out. “In addition, an Islamic treasury was set up to provide access to Shariah-compliant products for customers.”

In April this year, Habib Bank obtained a licence to operate a branch in the Chinese city of Urumqi – the first South Asian bank to be granted such licence. This has been beneficial in supporting the China-Pakistan Economic Corridor (CPEC) aimed at strengthening long-term alliance between the two countries.

CPEC is a pilot project under China’s One Belt One Road initiative involving US$46 billion worth of infrastructure projects mostly in Pakistan’s energy and power sectors. “CPEC is, indeed, a game changer and is of huge significance to both countries, not only in terms of its impact on the Sino-Pakistan polity, but also through the multitude of economic benefits that it seeks to provide for both countries,” says Irshad. “It will be a major driver for growth in the five to 10-year horizon both in terms of GDP as well as banking sector growth.”

This comes as the Pakistan banking sector face major challenges in finding lucrative avenues in a low interest rate environment and deploying liquidity in the corporate, commercial and SME sectors, Irshad describes as currently strained.

Another key challenge is the rapid change in technology and the increasing competition from financial technology (fintech) companies. “Social media companies with a huge user base are moving into the financial sector, bringing new sources of capital and investment,” says Irshad. “Millennial customers are now interacting with financial institutions online using social media to connect, communicate and complain. They do not have the traditional customer loyalties, and banks are being forced to rethink their interaction with this growing target segment.”

Habib Bank is spending on upgrading its internal systems as well as providing customers new ways to interact with the bank. It expects to be able to continue to provide reliable, low cost and innovative solutions to customers throughout the banking spectrum. Habib Bank has launched its internet payment gateway for online acceptance of card payments and introduced chip technology to enhance security for card customers. It also upgraded its systems and networks, and reduced the ATM downtime.

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15 Dec 2016

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