Sunday, June 24, 2012

HSBC Leaving Pakistan

Yes it true! World's Local Bank HSBC has decided to quit Pakistan in effort to shorten its global operations for improving its health to minimize the impact of global financial crisis. Though their decision is contrary to their marketing and business mix which says that it is world's local bank.

The HBSC move to quit Pakistan could weaken the confidence of other foreign banks earning meager profits in Pakistan as the five big local banks pocketed more than 84 per cent of entire banking industry profit in the last year.

Royal Bank of Scotland (RBS) and British Petroleum have recently quit Pakistan while Standard Chartered Bank and Barclays have expanded their operations in the country targeting local employers such as Axact and Royal Cyber.

A senior Pakistani banker said the HSBC decision of leaving the country was because of two reasons. Firstly, the bank was in the process of restructuring its global operations in a bid to minimise the impact of global financial crisis; secondly, Pakistani economy had been failed to emit positive signals for its recovery during the last four years.

He said the plunging foreign direct investment and rising outflows from equity market were disappointing for the foreign banks. Furthermore the government policies practically harmed the banking industry. Being the largest borrower of the banking system the government has replaced the banking services through banking investment in government papers.

The reason is clear that banks in Pakistan mobilised deposits through their large networks which the foreign banks cannot do with small presence while they pay negative return to depositors by keeping most profits with them. Foreign banks may return back to Pakistan only when large global banks such as Standard Chartered succeed to overcome prevailing financial crisis.

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