By Naween A. Mangi
June 5 (Bloomberg) -- Faysal Bank Ltd. plans to expand its domestic branch network in Pakistan and start a new Islamic division to take advantage of rising demand for Shariah-compliant products and farm loans. Shares rose.
The bank will increase its number of outlets to 150 by December 2009, and will start the Islamic banking unit next week, Chief Executive Officer Naved A. Khan said in Karachi yesterday, in his first interview since taking the helm in March. Faysal Bank, Pakistan's ninth-biggest, has 107 branches across the nation and plans to add 23 this year.
Khan is seeking to keep up with bigger rivals including Bank Alfalah Ltd. He said he wants to expand to be better prepared for the eventual end of a ``downturn'' in the credit market. Overseas banks such as ABN Amro Holding NV and Standard Chartered Plc are expanding in Shariah-compliant finance, a market Standard & Poor's estimates is worth $500 billion and growing 10 percent annually on booming oil revenue.
``Faysal has to expand its branch network very fast if they want to compete with others like Bank Alfalah,'' said Abdul Shakur, an analyst at Invest Capital & Securities Ltd. in Karachi, who has a ``buy'' recommendation on the stock. ``Al-Falah opened 36 branches last year, so Faysal should spend more on expansion.''
Faysal's stock, down 42 percent this year, rose 1.5 percent to 38.35 rupees at the 2:15 p.m. local time close on the Karachi Stock Exchange. The benchmark index fell 0.3 percent.
`Latent Demand'
The bank plans to use Islamic products including cards and insurance developed by Shamil Bank BSC, a Bahrain-based lender that owns 68 percent of Faysal. Khan said he will open seven Islamic banking branches this year, adding at least 10 more annually over the next three years.
``There's always been latent demand for Islamic products in Pakistan,'' Khan said. ``That demand is only just being tapped.''
Pakistan's Islamic banking industry expanded assets 75 percent in the 12 months ended Dec. 31 to 206 billion rupees, according to the central bank. There are six Islamic banks and 12 conventional lenders with Shariah-compliant outlets in the nation.
Islamic law bans the payment and receipt of interest, prohibits investment in businesses such as gambling and alcohol, and stresses profit-sharing. Pakistan is the world's second-most populous Muslim nation after Indonesia, with 97 percent of its 160 million people following the faith.
Farm Loans
Khan, 49, who took the helm at Faysal Bank after a decade at ABN Amro, also plans to double farm loans this year to 4 billion rupees. Agriculture accounts for a quarter of Pakistan's $146 billion economy and makes up less than 5 percent of total bank loans.
Faysal will open outlets in smaller towns and villages, Khan said. The lender also plans to introduce Internet and phone banking.
Khan expressed concern about the health of Pakistan's banking industry, after the central bank raised its benchmark rate to 12 percent last month to combat runaway inflation. Consumer prices rose 17.2 percent in April, the fastest pace in a quarter century, and the government this week said economic growth will slow next fiscal year.
``Banking in Pakistan has a tough couple of years ahead,'' Khan said. ``There will be tremendous stress on profitability because we're in a downturn in the credit cycle. That's why this is the time we need to prepare to reap the harvest when the cycle turns.''
To contact the reporter on this story: Naween A. Mangi in Karachi, Pakistan at nmangi1@bloomberg.net.
June 5 (Bloomberg) -- Faysal Bank Ltd. plans to expand its domestic branch network in Pakistan and start a new Islamic division to take advantage of rising demand for Shariah-compliant products and farm loans. Shares rose.
The bank will increase its number of outlets to 150 by December 2009, and will start the Islamic banking unit next week, Chief Executive Officer Naved A. Khan said in Karachi yesterday, in his first interview since taking the helm in March. Faysal Bank, Pakistan's ninth-biggest, has 107 branches across the nation and plans to add 23 this year.
Khan is seeking to keep up with bigger rivals including Bank Alfalah Ltd. He said he wants to expand to be better prepared for the eventual end of a ``downturn'' in the credit market. Overseas banks such as ABN Amro Holding NV and Standard Chartered Plc are expanding in Shariah-compliant finance, a market Standard & Poor's estimates is worth $500 billion and growing 10 percent annually on booming oil revenue.
``Faysal has to expand its branch network very fast if they want to compete with others like Bank Alfalah,'' said Abdul Shakur, an analyst at Invest Capital & Securities Ltd. in Karachi, who has a ``buy'' recommendation on the stock. ``Al-Falah opened 36 branches last year, so Faysal should spend more on expansion.''
Faysal's stock, down 42 percent this year, rose 1.5 percent to 38.35 rupees at the 2:15 p.m. local time close on the Karachi Stock Exchange. The benchmark index fell 0.3 percent.
`Latent Demand'
The bank plans to use Islamic products including cards and insurance developed by Shamil Bank BSC, a Bahrain-based lender that owns 68 percent of Faysal. Khan said he will open seven Islamic banking branches this year, adding at least 10 more annually over the next three years.
``There's always been latent demand for Islamic products in Pakistan,'' Khan said. ``That demand is only just being tapped.''
Pakistan's Islamic banking industry expanded assets 75 percent in the 12 months ended Dec. 31 to 206 billion rupees, according to the central bank. There are six Islamic banks and 12 conventional lenders with Shariah-compliant outlets in the nation.
Islamic law bans the payment and receipt of interest, prohibits investment in businesses such as gambling and alcohol, and stresses profit-sharing. Pakistan is the world's second-most populous Muslim nation after Indonesia, with 97 percent of its 160 million people following the faith.
Farm Loans
Khan, 49, who took the helm at Faysal Bank after a decade at ABN Amro, also plans to double farm loans this year to 4 billion rupees. Agriculture accounts for a quarter of Pakistan's $146 billion economy and makes up less than 5 percent of total bank loans.
Faysal will open outlets in smaller towns and villages, Khan said. The lender also plans to introduce Internet and phone banking.
Khan expressed concern about the health of Pakistan's banking industry, after the central bank raised its benchmark rate to 12 percent last month to combat runaway inflation. Consumer prices rose 17.2 percent in April, the fastest pace in a quarter century, and the government this week said economic growth will slow next fiscal year.
``Banking in Pakistan has a tough couple of years ahead,'' Khan said. ``There will be tremendous stress on profitability because we're in a downturn in the credit cycle. That's why this is the time we need to prepare to reap the harvest when the cycle turns.''
To contact the reporter on this story: Naween A. Mangi in Karachi, Pakistan at nmangi1@bloomberg.net.
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