Caretaker Commerce Minister Gohar Ejaz Unveils Plans to Stimulate Economic Growth in KarachiBank of Punjab Receives Affirmation of Preliminary Rating by PACRA for Additional Tier 1 Capital TFC

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Caretaker Commerce Minister Gohar Ejaz Unveils Plans to Stimulate Economic Growth in KarachiBank of Punjab Receives Affirmation of Preliminary Rating by PACRA for Additional Tier 1 Capital TFC

December 29, 2023

Karachi, The Caretaker Commerce Minister, Gohar Ejaz, has announced a series of initiatives aimed at boosting industrial activities in Karachi, including the establishment of a Garment City and the development of a specialized zone at Pakistan Steel Mills (PSM). This announcement comes as part of the government's efforts to revitalize the city's economic landscape.

According to Zameen.Com, during a meeting with Karachi's business community at the Governor House, Minister Ejaz outlined the details of these initiatives. The proposed Karachi Garment City (KGC) will span 300 acres and feature modern infrastructure, such as plug-and-play environment units and water recycling and treatment plants. The Board of Directors of KGC has approved the transformation of this area into export processing zones, offering land on a lease basis.

The discussion also covered the future of Pakistan Steel Mills, which has been a subject of deliberation since 2019. A delegation led by Minister Ejaz is scheduled to meet with Sindh Caretaker Chief Minister Maqbool Baqar to finalize the establishment of a special economic zone (SEZ) or export processing zone (EPZ) on the PSM territory. This meeting, including federal secretaries of commerce, industry, and the board of investment, will determine the specifics of this plan.

The federal cabinet was informed in October that upgrading PSM would require an investment of USD 1.4 billion. The current operational capacity of the PSM plant is 1.1 million tonnes per annum (mmtpa), with the potential for expansion to 3 mmtpa.

Minister Ejaz, while chairing the KGC board meeting, stressed the importance of investing in modern and eco-friendly projects. He expressed confidence that these initiatives would not only reduce manufacturing costs for industrialists but also significantly enhance KGC's export capabilities.

These developments indicate a proactive approach by the government to stimulate economic activities in Karachi, aiming to enhance the city's industrial prowess and overall economic health.

Karachi, The Pakistan Credit Rating Agency Limited (PACRA) has affirmed the preliminary rating for the Bank of Punjab's Additional Tier 1 Capital Term Finance Certificates (TFC) worth PKR 5 billion. This affirmation reflects the bank's robust growth and strong market position within Pakistan's banking sector.

According to The Pakistan Credit Rating Agency Limited, the Bank of Punjab has significantly grown its deposit base and expanded its market share, reinforcing its position in the banking industry. By the end of September 2023, the bank’s deposit base reached PKR 1,393 billion, marking a 14% increase from PKR 1,227 billion at the end of December 2022. A considerable portion of these deposits is attributed to savings, contributing positively to the bank's system share and moving it towards being classified as a large bank.

During the first nine months of the calendar year 2023 (9MCY23), the Bank of Punjab reported a net profit of PKR 5.98 billion, a decrease from PKR 7.59 billion during the same period in 2022. This decline in profitability was attributed to higher operational expenses and provisioning charges, coupled with the challenge of expensive funding costs.

Notably, the bank recorded a 47% growth in gross performing advances, reaching PKR 858 billion at the end of September 2023, up from PKR 583 billion at the end of December 2022. This significant increase in advances resulted in a substantial rise in the bank’s Advance to Deposit Ratio (ADR). Managing the associated credit risk in the prevailing economic conditions is essential for maintaining the quality of the bank’s assets.

Furthermore, the Bank of Punjab’s capital adequacy ratio (CAR) improved to 17.08% by the end of September 2023, up from 13.11% at the end of December 2022. This increase is attributed to the successive issuance of Additional Tier 1 and Tier-II bonds. The retention of profits to boost the CAR is deemed crucial for the bank’s financial stability.

PACRA’s rating for the Bank of Punjab hinges on its financial risk profile, influenced by the effectiveness of its cost structure and an increase in core profitability. However, any deterioration in asset quality could exert pressure on the bank's profitability and risk absorption capacity.