KARACHI: The Habib Bank Limited (HBL) will no longer operate any branch in the United States and will complete the voluntary closure of its New York Branch by March 31, 2020, in coordination with New York banking regulators.
In a notification sent to the Pakistan Stock Exchange (PSX) on Monday, HBL further said, “We wish to thank State Bank of Pakistan, New York State Department of Financial Regulations and Federal Reserve Bank of New York for their consistent support and cooperation throughout the process of winding up and close New York Branch.”
In a separate statement, HBL emphasized that the bank had voluntarily agreed, in coordination with the regulators in New York, to conduct a systematic wind-down of the bank’s affairs in New York.
The bank also clarified that even though the ebank would no longer operate any branch in New York, the bank will continue to service its clients’ US Dollar banking requirements, in Pakistan and other countries where it operates, through its network of correspondent banks.
According to the HBL statement, the bank proactively initiated a business transformation programme in early 2018, focused on its control and compliance processes and systems to further strengthen its adherence to international standards.
The bank also said it is following Wolfsberg principles. The Wolfsberg Group is an association of 13 global banks that developed financial industry standards for Anti Money Laundering (AML) and Know Your Customer (KYC) policies. These are akin to, and in some cases stricter than, the policies devised by the Financial Action Task Force (FATF).
As a reminder, the FATF met on Sunday to review Pakistan’s efforts against money laundering and terror financing.
According to the bank, as part of the programme, HBL made substantial, and effective investments in management time and resources to further strengthen its AML and CFT protocols and functions.
It also engaged the services of international experts to ensure that such functions were brought in line with international standards. The bank claims it has made significant progress on these fronts.
“For HBL, adhering to the international compliance standards and protocols is not just a one-off project but a sustained effort that governs the way we do business.”, the bank said.
The news has been met positively by analysts. According to a report prepared by Arif Habib Ltd. (AHL), “This is material positive for the bank as this finally settles the dust over the threat of further punitive action from US regulators.”
The report also noted that the “long-overhanging stress” on the bank will finally end, as well as the operating expenses.
The cost to income ratio of HBL shot up from 52pc in the third quarter of 2017 (when the bank faced actions from regulators in New York), to the current level of 74pc. AHL expected this to fall to 61pc in 2020.
Most of this can be attributed to the remediation, legal and regulatory costs of closing the New York branch. In 2018, costs related to the branch amounted to Rs6.4 billion; in the ninth month of 2019, costs were Rs2.8 billion. The business transformation program initiated in 2018, also cost Rs5.6 billion.
“The closure would help increase certainty regarding future earnings of the bank among investors which is likely to stimulate price performance of the bank’s shares,” the AHL report said.
Various analyst predictions estimate a December 2020 target price ranging from Rs197.9 to Rs 203 per share. Earnings for 2020 are estimated to be at Rs 22 per share.
Kyc and aml is BS, imposed by crooks , who themselves are the biggest ML’s