JS Bank is part of JS Group, one of the largest and most high profile business and financial services groups of Pakistan with interests in a diverse range of areas like financial services, insurance, banking, transportation, information technology, energy, agriculture and media. JS Bank was formed on January 1, 2007 from the amalgamation of the Jahangir Siddiqui Investment Bank (JSIBL) and American Express Bank Pakistan Operations. Since then JS Bank has emerged as one of the fastest growing and most dynamic banks in Pakistan. The bank has carved out a reputation for itself as a forward looking and aggressive player in Pakistani banking, deploying one of the fastest roll-outs in areas like network expansion, alternate delivery channels as well as new product introductions.
Blue Chip speaks to Naveed Qazi, President & CEO and Majid Hamid, Group Head – Retail Banking, JS Bank about the challenging task of establishing a new player in Pakistan’s extremely competitive banking industry as well as their vision of making JS Bank into an “Island of Quality” known for service excellence and dynamism on the Pakistani bankscape.
Q & A with Naveed Qazi President & CEO, JS Bank.
You have been involved with JS Bank since its inception. Can you tell us how the bank was formed?
NQ: “JS Bank was formed as a result of the amalgamation of the Jahangir Siddiqui Investment Bank (JSIBL) and American Express Bank Pakistan Operations. This was a very unique mix of a leading local business group taking over what was the oldest multi-national bank in Pakistan with over half a century of experience of working in the Pakistan market. While these two banks had very different outlooks, they had huge complementary synergies as they brought together an extremely talented pool of people who had the experience of both corporate and investment banking as well as high end retail banking services such as Wealth Management and Cards. Therefore the vision of JS Group since day one was that this bank would take advantage of this diversely talented resources and grow in both scale and outreach to become a significant player in Pakistani banking.”
Can you tell us a little about yourself and how you got into Banking as professional?
NQ: “I have worked and studied in Pakistan. I went to the Institute of Business Administration (IBA) which is still ranked as one of the most prestigious business schools in Asia. My first employment opportunity was with Exxon Chemicals which has since then grown to become Engro. After a short stint in the fertilizer business with Exxon, I got an opportunity to work with the Bank of Credit and Commerce International (BCCI) which was the leading bank of this region with a global outlook. I worked with the BCCI and had the opportunity to undergo significant training at the bank which was a hugely rewarding experience. I then moved onto the American Express Bank, which again being a leading MNC Bank in the region had the reputation of cultivating employees and retaining them for long periods. Since 1986, I was then associated with AMEX in a variety of capacities starting from junior positions to becoming Chief Operating Officer (COO) for the Bank till global shifts in the Bank’s strategy caused it to move out of Asia to focus on other core businesses. My stay at American Express, true to the bank’s reputation was hugely rewarding both in terms of professional and personal growth. I got immense opportunities for training, professional growth as well as exposure to a variety of markets in metropolitan and tier II markets in Pakistan and a number of countries around the world.”
Being President, you have been instrumental in setting the tangent for JS Bank’s high speed growth strategy. Can you elaborate on your vision of where you’d like to see the bank?
NQ: “I have had a very clear vision since the formation of the bank that while we needed to grow in both scale and outreach, being part of a bigger group that has over four decades of a proven track record of financial responsibility and acumen, we needed to tread very carefully to ensure that we never over-promise or under-deliver. This is something very important to both JS Group’s and the Bank’s work-ethic. We therefore have invested considerable time, energy and resources in ensuring that we grow rapidly albeit in away that we do not compromise on service excellence and delivery at any stage. This has always been a paramount concern and a base-line to my vision of making this bank an “Island of Quality” when it comes to service and the overall customer experience. Our strategy in a nutshell has focused on four key points: 1. Low-risk 2. Low-cost 3. Process Efficiencies 4. Deployment of superior technology. While this is not to suggest that we would not be going into premier banking areas such as consumer banking in the future which involve a higher degree of both risk and cost, the point is that our focus has been to ensure that all our initiatives are well planned and painstakingly thought-out.
If you look at our growth pattern in these last 18 months, you will see a definite pattern, we have worked towards providing core banking facilities to our customers first, improve back-line support by investing in the latest most cutting edge banking system called Temenos T 24. After this we have quickly moved to establish branches in all four provinces of the country and Azad Jammu and Kashmir. So in eighteen months we went from having 4 branches in 3 cities to having 77 branches in over 30 cities. This was unprecedented in Pakistani banking. Once we had the retail presence, we have focused on establishing a sizeable deposit and customer base with a clear focus on low cost deposits. This has been a sheet-anchor of our growth strategy. Once we felt comfortable enough that we had achieved significant critical benchmarks on the deposit and network outreach areas, we then moved into areas like Alternate Delivery Channels (ADCs) and deployed one of the fastest ATM deployment with two global leaders in the business; NCR and Diebold. So the point is that while we have significant plans to do just about every banking service available we will only initiate it once we have the confidence that we can provide a better than market solution to our customers through either process or product value addition. What this translates into for the customer is that they will constantly be something new and exciting offering coming out of JS Bank with a minimal risk of service breakdowns which have plagued the growth of other Pakistani banks.”
New Technology Banking seems to figure big in your plans. What is your strategy for products such as Internet Banking and do you feel that there is a market for such products in Pakistan?
NQ: “Service and Technology both are key components of our growth strategy. The meteoric growth that we have witnessed in these last 18 months would not have been possible without these two primary areas. However as I mentioned earlier, it is extremely important to us to ensure that whatever we offer our customers has to be backed by the best possible service and support infrastructure and must provide real value to their overall experience of banking with us. This primal thought holds true for everything from must-have services like branches and ATMs to value added services like Branchless and Internet banking, both of which we hope to launch in the near future.
Today the Pakistani banking customer has both the choice and the exposure to a wide range of options in the market. The growth in media particularly satellite television has broadened people’s knowledge of banking services available around the world and that has made them more discerning. Having said that there is huge potential particularly in tier II and III cities as consumers are becoming more aware of high technology banking products and the support structure necessary for such services like broadband Internet and Mobile Telephony is being made available. All this is creating a huge market for technology services as customers are willing to subscribe to these services due to the matchless convenience and efficiencies that they offer. This makes it a key growth area for JS Bank however as I mentioned we will broaden our offerings in the technology sphere in a phased and gradual manner in line with our overall strategy to ensure impeccable service provision and value addition.”
What do you feel about the present trend of consolidation of banks in Pakistan? JS Bank was also amongst one of the banks making a bid for the acquisition of RBS in Pakistan. What is your view on the results of that process?
NQ: “There has been a fairly long history of consolidations of banks in Pakistan, this has particularly happened as mostly MNC banks exit the market due to a shift in global strategy and local banks acquire these MNC banks due to the strength of their business lines, systems and structures as well as the overall value of the franchise. The formation of JS Bank has I believe one such good example of an acquisition of a MNC bank by a local group. Consolidations and mergers work if both the parties involved have some value that they can bring to the mix. It has to be a partnership where the resulting synergies of the consolidation work to the advantage of the resultant entity. I do not think that has been the case with every merger that we have seen in Pakistani Banking. With RBS, the case was the same of a global giant, disinvesting out of its local operations due to its problems in its operations in larger international markets. At JS Bank, we felt that there was scope of considerable synergies that could have been put in place by brining in the Pakistan operations of the bank particularly in areas like consumer lending, cards and premier banking. We felt that a consolidation could further fast-track some of our growth plans in these areas and would have also complemented our growth plans in core functions like branch expansion and deposit generation. Therefore after acquiring the necessary approvals from the State Bank of Pakistan, we conducted a detailed due diligence process along with several other leading banks.
In the end MCB Bank came out as the winner of the process. While we felt that RBS would be a great fit with JS Bank, I feel that the result of the process will overall be positive for Pakistani banking. MCB Bank is a significant market player and we wish them the best of luck. For JS Bank our growth plans continue to remain on track and one of the very positive corollary of this process was that we were able to demonstrate to both the banking regulator as well as the public at large our commitment to the Pakistani market and the confidence of both our management and that of our principals at JS Group in our aggressive growth plans. We will continue our growth momentum and will always be open to any such possibility in the future provided as I said earlier it is an alliance in which both parties bring significant value addition to the mix.”
Pakistan is currently going through a fairly stark recessionary phase. What challenges do you feel banks like JS Bank face while working in this environment?
NQ: “2008 and 09 have been challenging years for banking not just in Pakistan but across the planet. We have seen iconic banks and financial institutions with over a century of history be consigned to the dustbin of history. Banks like us need to draw huge learnings from these on the risks of both over-commitment and over-leveraging. At JS Bank we have worked towards ensuring that we create a work-ethic where our assertive growth strategies are always in line with very strict operational standards. This held us in good stead during what came to be popularly known as the “banking liquidity crunch of last year”. What we saw last year was clearly more a crisis of confidence than anything else because in the final analysis Pakistan is a very insulated economy from the global mainstream. Having said that two major components of the current economic fall-out which triggered the crisis were rising fuel prices and a slowdown of our exports. This caused some intense shocks locally the largest of which were the floor freeze of the stock market for a few months which had an immense negative impact on the consumer confidence. While larger banks with bigger deposit bases and lower costs were not significantly impacted, this crisis showed some fault-lines into the strategy of smaller banks particularly those who had higher ADRs (Asset to Deposit Ratios), some of these banks were sitting on 70 – 80% ADR which caused them to face a liquidity crunch. This then caused an entire domino style chain reaction with smaller banks rushing to pick up high cost deposits from either the central bank or large scale corporates which further eroded their earning spreads and disrupted their top-lines. Banks that have worked consistently towards broadening their deposit bases and keep the cost of deposits low have continued to flourish regardless of their size.”
Would you then attribute the strategy mentioned above to how did JS Bank manage to work during this period of uncertainty?
NQ: “Absolutely. We had always been very careful in our commitment levels. This was primarily due to the outlook of our principals at JS Group. Since day one we had a very clear vision of diversifying our deposit base and not relying overtly alone on just large scale depositors. Furthermore, we have been very selective on our asset deployment. Also JS Group, being committed to this bank for the long run had supported us through significant capital backing and has used the crisis to demonstrate its support for the bank. While other banks have curtailed their growth plans, we have continued to expand with full force, which is something that has been appreciated by the market as well as by the SBP as confidence building measure for the entire banking sector. We applied for 80 new branch/sub-branch licenses this year which were all approved by the SBP. Today wherever we open operations the feedback that we get is that customers are viewing us as a stable, responsible and growth oriented bank. So in that way the crisis has had a positive spin for us and we have thanks to a combination of prudent management, supportive principals as well as a clear stable growth strategy come out of this crisis very smoothly.”
Non-performing loans are a clear challenge to Pakistan industry. What are your views on the subject?
NQ: “Non-performing loans (NPLs) have been a considerable challenge to the banking industry and continues to be so as we face an overall economic slow-down. The situation is further aggravated by the chronic energy shortage, fuel prices and the global economic shrinkage which is hampering export potential. All of this will continue to potentially increase the level of NPLs particularly in areas like SME. The only way forward on this is for bank’s to have a significant and assertive Risk Management structure in place which is supportive of the creation of a diversified risk portfolio. At JS Bank we have the advantage through our association with the JS Group of considerable experience and expertise in capital markets. So while as a bank we continue to lend in the equity market, a combination of a very prudent risk management policy and accompanying group level experience has held us in good stead.
- You have worked with both MNC and local banks in senior capacities? What are the challenges of leading both types of organizations and what does it take to be an effective leader?
NQ: Clarity of vision is paramount for any leader as is the ability to listen to good advice.Be it in an MNC setting or a local company, a leader needs to inspire confidence in both his judgment and his ability to act as a safety net for his team as they build the business. I have always felt it the greatest responsibility of a leader to be the first amongst equals especially when it comes to adhering to policy and living within the law. This I feel has always been a significant leadership challenge for Pakistani Managers. Being a bank our size, one of the key advantages has been our lean structure, I have always tried to use that as an advantage through an open door policy at all tiers of the bank’s management starting with myself. It is important for a leader to provide clarity of roles, responsibilities and accountabilities through effective communication. I have initiated a series of communication platforms ranging from Town-Halls to management forums and Q&A sessions with the entire bank’s staff at various opportunities. This policy has paid rich dividends, as today JS Bank has a reputation of bringing out globally competitive product and service initiatives at a faster than market pace. Our policy of constant communication and accessibility has ensured that we achieve completion on projects at a pace that has set new benchmarks for Pakistani banking.
- Is Human Resource Management an area of concern? What is your strategy for managing growth in this area?
NQ: We place great emphasis on human resources. Being one of the fastest growing banks in Pakistan, attracting and retaining the right kind of personnel is instrumental in fueling our growth. A key challenge in this process is we are hiring people from different banks and different corporate cultures. We need to bring people into a collective JS Bank culture so that they share our principals and work-ethic which puts great emphasis on service, integrity and detail orientation. We have training programmes and we have started training front-end people because that is the first point of customer contact. We are training them in ‘know your customers’, anti-money laundering and how to enhance service skills. Ultimately, it is the level of service which makes the true difference from the customer’s perspective. You can only differentiate from other banks based on service levels and that is what we are focusing on — to train our people to ensure that they give top class service making it the key differentiator between us and the competition.”
What is your outlook for Pakistani Banking in general and JS Bank in particular?
NQ: “I have stated this repeatedly at various forums that JS Bank’s future is intrinsically tied to the future of Pakistan, which as I feel is extremely bright. The key is to understand what this market will need and to provide that in a way that is accessible, efficient and rewarding for both the bank and the customer. The environmental challenges such as volatility in interest rates and macroeconomic fluctuations will continue but one must focus on changing challenges into opportunities. We are increasing focus on core banking services such as deposit mobilization, investment banking and managing treasury operations more efficiently to read the market better than our competitors. All of these are sizeable opportunities for us. The bottom-line for us is that we want to establish ourselves as the best in class bank and emerge as a serious, performance driven and customer centric bank across Pakistan. Everything we do, ranging from introduction to new products to the expansion of our branch network and initiatives in service and technology brings us closer to this goal.”
Q & A with Majid Hamid, Group Head – Retail Banking, JS Bank.
Retail Banking is a relatively new function at JS Bank. Can you tell me why the bank chose to enter so late into this area?
MH: “Opening up a full fledged retail banking set up was always a priority area for JS Bank ever since the bank was launched after the amalgamation of Jahangir Siddiqui Investment Bank (JSIBL) and American Express Bank Pakistan Operations. However in line with the bank’s growth strategy, it was important that we have all the necessary back-line support functions in place before we launched Retail Banking. So much of 2007 and 2008 was spent building the necessary back-line functions, installing a new core-banking system, the necessary Risk Management, Operational and functional base-lines for the bank to expand with a nationwide network presence. Once this was achieved, the Retail Banking function was launched.
The vision of JS Group for the bank was always to create a mid-sized, performance driven bank with a significant customer base and network outreach across Pakistan, and one cannot achieve that scale without having a full-service retail bank as part of the offering mix.”
How did you come on Board JS Bank and what is your mandate considering that you are building the entire function from scratch in what has been dubbed extremely challenging times?
MH: “I was working outside of Pakistan at the time and was approached with a mandate of building a retail banking function from scratch. This was a most challenging proposition because very few people get opportunities to build organizations like this from such a clean canvas. Secondly the bank was backed by JS Group which has the history, appetite and reputation of building world-class and globally competitive businesses. So this was a huge attraction for me. It has been over a year since I have been associated with JS Bank and it has been a great ride so far. We have managed to achieve great benchmarks at meteoric speeds at the bank and I am proud to have been a part of the process. As Head of Retail Banking, I have complete carte blanche at setting the priorities of the business and the full support of JS Group. This has been instrumental in achieving all that we have and feeds our confidence as we expand our outreach and offerings to a wider customer audience across Pakistan.”
Tell us about career and how you ventured into banking?
MH: “I have been working in banking since 1993 after I returned to Pakistan after graduating from the UK. My first employer was Emirates Bank where I worked in corporate banking. I then moved to ANZ – Grindlays for what was to be a seven year association. At that point in time, Consumer Banking started making inroads into the Pakistani market I decided to switch into this upcoming area which was figuring high on the radar of opportunities of all banks.
I then moved to Standard Chartered Bank to jump-start their consumer banking initiative in Pakistan. This proved to be a turning point in my career. I was then approached by my former employers at Emirates Bank with a mandate to reenergize their retail banking business in Pakistan. Emirates Bank in Pakistan was then acquired by Union Bank which by then had grown to become the most progressive Pakistani bank under Shaukat Tareen. I was fortunate to be part of that team as the youngest member of the bank’s management committee. Shaukat gave us a clear mandate and all required support to build the Consumer Banking business at Union Bank. Here I managed to launch “Ready Cash” a product that went on to making such huge waves in the banking sector that it is still dubbed as the trigger that launched the consumer banking revolution in Pakistan. My experience at Union Bank was instrumental in shaping my management work ethic. Working with Shaukat gave me invaluable insight on how to empower and motivate people to work beyond their capacity and achieve the near impossible.”
You have had considerable international experience. How is that different from working in Pakistan and what are key lessons that you are applying to JS Bank?
MH: “I was approached by Al-Rajhi Bank which is the biggest Islamic bank in the world and a major player in the Kingdom of Saudi Arabia. My mandate with Al-Rajhi was to build on the Retail Banking business with a particular emphasis on developing the SME and Transactional Banking lines. Working in Saudi Arabia was a huge learning for me as it gave me an opportunity to see banking develop in a culture that was very different from Pakistan. However one of the things that struck me was that despite our differences, there are some important unifying points common to all customers. These include the fact that customers above all want to be treated with respect. They want their bank to listen to them and visibly work towards addressing their concerns. Also another interesting aspect was that we tend to overlook customers in peripheral markets when providing services; often prioritizing metropolitan customers at their expense. This is a fallacy as smaller towns and cities have as discerning and high profile customers as metropolitan markets. In most cases these customers are overlooked not just by you but also by your competition and with just a little increased focus they can be made into an extremely loyal customer segment for your bank.
These are all key findings that I brought to the Retail Banking launch at JS Bank and the attention that we have paid to these aspects have been hugely rewarding. Today our tier II and III city branches are some of our most profitable and we are seen as a bank that has the same impeccable service both in metro and non-metropolitan markets. This is the kind of reputation that I want JS Bank to have and I feel our principals in JS Group also share the same vision.”
The last 12 to 18 months have been very eventful for JS Bank’s growth in terms of network, products and profile. Can you elucidate on how you managed to do so much in such a short time-frame?
MH: “I would attribute our success to two main factors. The first was a very clear vision that we were pursuing since the start of retail banking, which was to become a market competitive bank with a sizeable network outreach and offerings base to be a significant player in Pakistani banking. We not only had this clarity but also the whole hearted support of our principals at JS Group as we set about realizing this vision. Second we have the best team in the business and the results are very clear. I am a firm believer in hiring the best and empowering them to do their jobs. Today look at any aspect of our growth strategy ranging from branch expansion to the deployment of ADCs, JS Bank is a clear winner with a faster “to market time” than any contemporary or even larger bank. Even our support functions like Service Quality and Marketing Communications have performed remarkably well. Our recent communication campaign won an international award from the prestigious Khaleej Times newspaper in the UAE for the best banking communication in Pakistan. So whether it is opening 80 branches/sub-branches in one year to reach 100+ branches in over 50 cities or deploying cutting edge products and services, my team is making history and breaking records. If you look at the change in the perception of JS Bank in the last 12 months it has been phenomenal. From being perceived as a small niche player, we are now viewed as a dynamic, stable and progressive bank across Pakistan not just by the general public and our customers but also by the banking regulator and rating agencies such as PACRA who has recently upgraded our rating to A and A1 in the long term and short term respectively. These are all huge achievements for such a young team and I am glad that I could be the catalyst to bring all these talented people together at JS Bank.”
What in your opinion will be critical benchmarks that will ensure JS Bank’s success in the extremely competitive field of Retail Banking?
MH: “Technology and service are two key areas where achieving excellence would be the acid test for the success of any Pakistani bank. We are working on both fronts with a clear focus to create competitive differentials. Today, the customer is aware of what is being offered across the globe and is spoilt for choice because there is so much competition. The only way a bank at the stage we are at can successfully create a niche for itself is when it creates efficiencies in both service delivery and the overall customer experience. In line with this vision we have committed immense resources on both Service Quality and Technology. We have implemented a world class core banking system the Temenos T-24 and are amongst a select number of Pakistani banks who have managed to be 100% compliant on it. This gives us the necessary back-bone to launch a plethora of technology driven banking products on which we can build credible differentials in offerings. Secondly, we have formed a structured and independent Service Quality (SQ) function with a dedicated Problem Resolution Unit (PRU) which is working towards giving customers a better than market service experience. Being a young bank in an extremely competitive industry, it is ultimately our offerings and our ability to both attract and retain customers will be mission critical benchmarks of our business model. Therefore both Service and Technology rank very high on our radar and will be the sheet-anchors of our success in the years ahead.”