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NBP’s China plans hit snags over capital requirements

By Our Correspondent
February 21, 2018

KARACHI: National Bank of Pakistan said on Tuesday a planned opening of its first branch in China is facing delays due to tighter regulation and capital requirements set by the Chinese central bank.

“We are facing problems to start banking operations in China because of a decision by the Supreme Court of Pakistan, which requires one-time capital adjustment of Rs47.5 billion on the NBP’s balance sheet,” Saeed Ahmad, president, NBP told analysts at a briefing. “Our NPL (non-performing loan) ratio remains higher than other banks due to loans written off in the past five years."

The bank had planned to open two branches in China this year after getting regulatory approvals from both sides.

Ahmad said the bank would not be able to fulfil the criterion, "if Rs47.5 billion is eroded from its balance sheet”.

Balance sheet of the bank rose 20 percent to Rs2,370 billion in 2017, whereas gross loans and advances increased by Rs75.5 billion, reaching Rs857 billion. NPLs inched up 1.16 percent in 2017. Investment also increased by Rs72.4 billion and reached Rs1,296 billion, the bank’s financial data showed.

NBP is the second Pakistani bank which planned to start operations in China. Habib Bank Limited, the country's largest bank, has already its footprints in the neighbouring country.

NBP also has set up a representative office in Beijing, China since 1981 to provide banking facilities to the Chinese and Pakistani corporates.

The NBP officials emphasised that the CPEC, which was a flagship project of Chinese Silk Road, “One Belt One Road” is a great source of attraction for many Pakistani financial institutions, at least for the coming decade. Earlier, the board of directors of the NBP approved the bank’s financials for the year ended December 31, 2017.

The NBP president said the first priority of board of directors is to maintain continuity of bank’s business which is very much dependent upon its capital base. "The Bank has filed review petition against the judgment of the Supreme Court of Pakistan in the pension case and has also moved an application for constitution of a larger bench which has been accepted. Pending the decision of review petition, financial impact of the subject case has not been included in the financial statements as the bank looks forward to a favourable outcome of the case,” Ahmad added.