Speaking to journalists during his visit to the Karachi Stock Exchange (KSE) on Thursday, Citi executive James C Cowles said he is “very optimistic” about economic opportunities in Pakistan. “We think the government has been making all the right decisions. GDP growth is 4.5%-5.5%. We think that’ll continue over the coming years,” he said.
Calling KSE one of the better performing stock exchanges globally, Cowles said Citi foresees “a lot of upside” going forward. “When you look at the market capitalisation versus GDP, it’s still very low,” he said. Market capitalisation currently hovers around 27% as opposed to 46% before the 2008 financial crisis.
“There’s a lot of upside both in terms of (price-to-earnings) multiple expansion as well as earnings expansion because of GDP growth,” Cowles said.
Citi sold its consumer banking operations in Pakistan three years ago. Habib Bank acquired its consumer portfolio at a transaction value of approximately Rs2 billion in 2012. Since then, Citi has been involved in investment banking and corporate finance in Pakistan. Citi’s clientele in Pakistan, according to Cowles, consists of global companies that operate here besides local financial institutions and public-sector companies.
Replying to a question about the banks’ conservative lending policy despite a low benchmark interest rate, the Citi executive said banks should provide financing for all sectors of the economy.
“We are involved with the public sector, but our primary business in Pakistan is providing funding to local and multinational companies and local financial institutions, so they can have liquidity that they can lend on. We are growing our balance sheet,” he said.
The international credit rating agency Moody’s has upgraded the outlook for Pakistan’s banking system to stable from negative, reflecting the improvement in the country’s economic growth prospects.
According to the latest financials of Citi Pakistan available on its website, its earnings clocked up at Rs1.6 billion in the first quarter of 2015, up a massive 238% from the same quarter of 2014. However, the extraordinary increase in earnings owes its existence to the gain on the sale of securities (Rs1.6 billion) during the quarter. Its net assets amounted to Rs11.8 billion on March 31, which makes it the 19th largest bank operating in the country.
Citi was one of the pioneers of consumer banking in Pakistan. From car financing to credit cards, Citi played a role in popularising such products back in the 1990s. But shrinking profitability in consumer banking led the bank to decide against staying in the segment later on.
From National Bank Chairman Muneer Kamal to Bank Alfalah CEO Atif Bajwa, Tameer Microfinance Bank CEO Nadeem Hussain, former finance minister Shaukat Tarin and former prime minister Shaukat Aziz, Citi Pakistan has produced a large number of bankers who went on to have illustrious careers after leaving the global bank.
Replying to a question about the future course of action for Citi Pakistan, Cowles said his bank will remain focused on the institutional banking market within Pakistan. “That’s where our expertise is. That’s where we think we provide value in terms of what we can offer to our clients and the country,” he said.
