Business

Bank CEOs earn 367 times more than average Pakistani

Yearly remuneration of each CEO amounted to Rs59.6 million on average in 2015

Kazim Alam May 29, 2016

Yearly remuneration of each CEO amounted to Rs59.6 million on average in 2015. PHOTO: STOCK IMAGE

KARACHI: Bank CEOs earn on average 367 times more than what a typical Pakistani makes in a year.

Based on data compiled by KPMG Taseer Hadi & Company and calculations by The Express Tribune, the combined remuneration of the CEOs of 27 commercial banks operating in Pakistan amounted to Rs1.6 billion last year. This means each of the 27 bank CEOs earned on average Rs59.6 million in 2015.

The Big Five and their top executives' total salary

The per-capita income in Pakistan averaged just Rs162,568 in 2015-16. This shows the ratio of the average bank CEO remuneration and the per-capita income in Pakistan hovers around 367-to-1.

Similarly, bank CEOs earned on average 56 times more than what their average colleagues took home in 2015, official data shows.

Total staff costs – including salaries, allowances and retirement benefits – that the 27 banks incurred on their combined workforce comprising 153,886 staff members in 2015 amounted to Rs163.5 billion. It translates into a CEO-to-staff remuneration ratio of 56-to-1 in 2015 as opposed to 58-to-1 recorded in 2014.

Banking data reveals huge variance in the CEO-to-staff remuneration ratio among 27 commercial banks. For example, the widest gap between the remuneration of the bank CEO and that of an average staff member existed in Silkbank (106.5) and United Bank (104.8). Bank Alfalah (96), Soneri Bank (94.1) and MCB Bank (92.9) also had high CEO-to-staff remuneration ratios.

UBL spent over Rs24 crore on CEOs in 2014

Industrial and Commercial Bank of China (6.9), Deutsche Bank (9.8) and the Bank of Tokyo (9.9), which are some of the smallest banks operating in Pakistan, had the lowest CEO-to-staff remuneration ratios last year.

National Bank of Pakistan employs the largest number of bankers in Pakistan. With 25,425 staff members, its workforce accounts for 16.5% of the people employed in the country’s banking sector. Its CEO-to-staff remuneration ratio was 60.5 last year, up from 41.6 recorded in 2014.

Habib Bank was ahead of its rivals within large and medium-size banks in terms of the cost per staff. It clocked up at Rs1.6 million per staff member in 2015 for HBL as opposed to Rs1.5 million for Standard Chartered and Rs1.2 million for United Bank.

Do bank CEOs deserve huge salaries?

Top-earning bank CEOs last year were of United Bank (Rs127.3 million), Bank Alfalah (Rs97.1 million), Silkbank (Rs86.1 million), MCB Bank (Rs84.7 million) and Habib Bank (Rs75.1 million).

Banks whose CEOs received a relatively lower remuneration in 2015 include Bank of Tokyo (Rs16.1 million), Bank of Khyber (Rs21.5 million), JS Bank (Rs24.9 million), First Women Bank (Rs28 million) and Summit Bank (Rs32.4 million).

The annual remuneration of the CEO of Bank of Khyber was the second-lowest last year in spite of a 194.7% annual raise. Other banks whose CEOs received a fat year-on-year raise in 2015 include Askari Bank (68.4%), National Bank of Pakistan (50.8%), Habib Bank (41.3%) and Standard Chartered (35.8%).

The writer is a staff correspondent

Published in The Express Tribune, May 30^th, 2016.

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COMMENTS (13)

Smajik | 8 years ago | Reply @Qasim Cheema My dear friend I have a post-graduation in Economics and a CFA charter, and by unfortunate fate of being a banker can contribute to the argument a bit. Well, I do get your point concerning disproportionate distribution of wealth (totally with you on that one) but that Sir is a different debate, we are discussing the idea of removing the concept of interest from economic framework altogether. Probably one day we will have brilliant muftis who can contribute thought provoking practical alternatives (or working papers if we are lucky) but until then my friend we are in a fix. I have seen first hand these so called profit sharing loan schemes being created, and sorry to break it to you but there is no such thing as Islamic banking in Pakistan. In developed countries entrepreneurs do secure a loan by submitting viable feasibility studies or business plans without a collateral, how do you think all these tech titans (Larry page,Zuckerberg,etc) were able to start mega companies out of their dorm rooms. Litmus test of any idea is its practical application without resorting to treat it as a thought experiment with utopian overtone. Look at the developed world, I think the capitalist model has worked, by and large you have balanced standards of living with thriving middle class. Can you name a single Muslim country where it is otherwise, and please don't resort to the feeble argument to state that we are not following all the tenants in their entirety. With background in finance you must be aware that interest has an inflation component build into it, so a bag of sugar costing 1RS today would cost slightly higher next year (demand and supply) any lender of money needs to be compensated for that erosion of purchasing power. The interest which was referred to in our scriptures was the practice of loan-sharking, where lenders charge exorbitantly high interest rather than justified opportunity cost of capital. Do we have loan-sharks in the Pakistani banking system, yes we do. Just look at micro finance banks, they take donation from supra-nationals (for free) promising to provide viable alternate to the banking channels to the common man. but what do they do, they take jewellery from these poor folks while lending only 60 paisa per 1RS of security and charge north of 35% interest per year. Now that my friend is what we were warned against. The question is are we doing anything about it, Unfortunately NO, I guess our lawmakers already have a lot on their plate.

Qasim Cheema | 8 years ago | Reply @Smajik: My dear friend I am a CA, I know inside out time value of money. 1st things 1st just because something that has Islamic written with it does not mean it is Islamic!. Second, if the borrower has a good entrepreneurial idea then still no banker will give a loan without a security!. Herein lies my point, that the rich can support such ideas by taking a risk and sharing the profit/loss of businesses developed from such ideas, rather than getting fixed returns, which if the borrower is unable to pay at some time due to any problem, can easily be covered by taking over the security. The basic tenant of the ideology against interest is exactly this, there is no risk of loss. Fractional banking, credit creation etc without backing of real wealth is plain and simple wrong.

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Smajik | 8 years ago | Reply @Qasim Cheema: You've got to be kidding me. Well, are you familiar with the concept of time value of money? Pick any economics book you can get your hands on and read, it might give you a basic understanding of how our economies are structured. Modern economics, finance and all Islamic mode of financing YES I repeat all Islamic mode of financing is based ultimately on this time value of money ( or interest in other words). And next time you meet any "Islamic banker" ask how those rental/interest payments are calculated (hint: KIBOR) if that is not interest I don't know what is. Please stop using religion for commercial gain. Our whole economies are structured through interest, without interest you would have no money, in fractional banking system "money" is an effective loan to the government by state bank....no interest no money period. Also, if would have been familiar with monetarist school of though (which 99% of central banks follow including SBP) you would have known that controlling the interest rate is main tool available to the state bank to rein in inflation and promote economic growth in a country. Please get out of your delusions, you mentioned that if the lender takes proper security there is no risk. Well what about if the borrower has nothing to start with apart from a good entrepreneurial idea, then what? Please think and stop propagating this notion on ill founded understanding of how you think economies work just because you were told by someone at an impressionable age. However, I do agree that interest charged by Pakistan is significantly high, compared to developed countries. But for that we need more regulation and fine tuning.

Fahim | 8 years ago | Reply They have work harder every seconds in their live plus good luck

Shahid Akram | 8 years ago | Reply Bank CEOs earn more than average working class all over the world.

Qasim Cheema | 8 years ago | Reply @ali: You are conceptually so wrong. Anti-interest is not just an islamic thing its basic economics. Why do you think whenever there is a danger of lower gdp growths or recessions, governments lower the interest rates? Eg Japan have negative interest rates. Because lower interest promotes industrial activity. Which is the actual productivity. Value is created due to use of an item, banks increase money without increasing value, hence the inflation. If someone is poor he can get richer by working harder and offering better value for his skill/labour along with some luck, but to think that he can get a interest bearing loan and get richer it is preposterous and offending. Rich can help the poor by lending at no interest or if they want to risk it then sharing the profit/loss of the business. Fundamentally interest is wrong because the lender (when he takes proper security) can never make a loss. There is no risk in banking, theres more or less profit and thats it. Stop hating islam for the sake of it. Learn the economic system proposed by Islam and you will see how much better it is for everyone.

nadeem | 8 years ago | Reply @Haji Atiya: I think the main source of income for Pakistani banks is the endless borrowing of the Pakistani government. Unlike banks in 'normal' countries - where they have to lend to all type of customers to turn a profit - banks here sit pretty milking one big fat customer called the GoP. Less risk, much less hassle than chasing after several customers, and high rewards as the article highlights.

kamran | 8 years ago | Reply The bigger travesty is that it is the depositors money invested mainly in government paper (risk free) which is being eaten up by these egomaniacs.

ali | 8 years ago | Reply @Sajid oh please brother get real. get out of your 13th century thinking. not defending the CEOs of banks here but without banks and without their interest (riba) based system you will not be able to live your life with so much ease as am I sure you do. Interest is not the fundamental tenant of the modern financial system (its actually risk-reward mechanism) but it is indeed one of the very important features. Interesting you implied that it creates rich-poor divide, its actually the opposite. if you are poor the only way to get rich is to go the rich lender and start an enterprise with his money while bearing interest cost. that enterprise creates jobs and contributes to GDP. everyone wins!!! Interests makes a lender take the money out of his pockets because he see's a reward in the shape of interest otherwise WITHOUT INTEREST the poor guy would remain poor and the rich lender will not be able to do anything but to see his money lose value due to inflation. everyone would loose!! Please stop listening to Mullahs.. who have never read a single economics book in their lives. Oh btw. you know why there exists a rich-poor divide? its because the rich dont pay their due taxes. Poor interest doesn't have anything to do with it.

Haji Atiya | 8 years ago | Reply @Sajid: The productive sector in Pakistan is miniscule for a whole number of reasons...the banks here are mainly catering to the property and real estate markets; apparently buying and selling plots in a myriad of property schemes is the primary way to make any money here.

ZeroHedge | 8 years ago | Reply @Point: investing more than 50% assets in Govt paper isn't working harder 56x

Point | 8 years ago | Reply They do work 56 times harder as well. ..just saying

Sajid | 8 years ago | Reply The question is how the banks earn money? A piece of paper cannot generate another piece of money is the doctrine of Aristotle. If Money earned without any real production in the economy, the economy loss its momentum and as a result it creates class difference, the poor gets poorer and rich becomes richer and as a result more class differences creates in society where rich people get advantage of being investment in their hand while poor people will work hard day n night just to full fill the basic need of life. That's why interest (Riba) is prohibited in all monotheist religions.

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