A plausible increase in the administrative expenses of nine leading banks of the country has been witnessed since 2008, while in total they have incurred Rs492 billions in the said category in the last five years. In line with increasing banking spreads, this indicates that the depositors are getting low returns from banks, while banks are spending more on administrative costs due to increasing inflation.
Rs98.71b incurred by
National bank in 5 years: According to the data compiled from the annual reports of nine leading banks of the country for the last five years, Habib Bank Limited tops the list by spending Rs98.71billion on its administrative expenses, while National Bank and United Bank stand at second and third by incurring Rs94.59 billion and Rs74.26 billion respectively.
The amount other banks spent on their administrative expenses include Standard Chartered bank Rs54.55 billion, Bank Al-Falah Rs48.12 billion, Muslim Commercial Bank Rs 41.33billion, Allied Bank Rs40.12 billion, NIB bank Rs21.95 billion, and Faysal Bank Rs18.85billion.
Rs129.466b spent in 2010: Total amount spent by these banks on year on year basis is as follows: Rs66.51 billion in 2006, Rs81.18 billion in 2007, Rs102.224 billion in 2008, Rs113.128 billion in 2009, and Rs129.466 billion in the year 2010. The net increase in the administrative expenses in 2007 was Rs14.66 billion, and in the year 2008 it was Rs21.04. While in the years of 2009 and 2010 the net increase stood at Rs10.90 billion and 16.33 billion respectively.
In this regard Khurrum Schehzad of Investcap, when contacted, said that with the passage of time inflation increased, so did the administrative expenses of banks, and they have to expand their network, work on new infrastructure, increase salaries, open new branches, enhance advertisement etc. but all this does not depict growth in the sector.
Increasing administrative expenses is a negative sign for growth of a bank, yet if the bank spread increases in parallel, it shows that the depositors are getting low returns on their deposits, he added. It is pertinent to mention that banking sector spreads seemingly peaked on monthly basis in July this year on the account of two basis points to 7.88 percent.
Non Performing loans increase to Rs5.54b: On yearly administrative expenses, HBL spent Rs16.31 billion in 2006, Rs17.35 billion in 2007, Rs20.25 billion in 2008, Rs21.73 billion in 2009, and Rs23.05 billion in 2010. Similarly, the second top bank of the list, NBL spent Rs13.44 billion in 2006, Rs14.20 billion in 2007, Rs18.17 billion in 2208, Rs22.57 billion in 2009, and 26.20 billion in the year 2010. UBL, in the same category incurred Rs10.95 billion in 2006, Rs13.42 billion in 2007, Rs15.52 billion in 2008, Rs16.60 billion in 2009, and Rs17.76 billion in the year 2010.
NBP in the year 2009 and 2010 spent much in this respect as compared to any other bank, as it incurred Rs48.77 billion against HBL’s spending of Rs44.78 billion in this regard in the same period. One interesting thing regarding the issue is that this increase in administrative expenses of the above mentioned banks was seen side by side with expanding size of nonperforming loans (NPLs), which touched Rs5.54 billion this time.
Exorbitant increase in administrative expenses of banks
