ISLAMABAD: With deteriorating indicators and governance issues being raised by the banking regulator, the National Bank of Pakistan (NBP) is seeking a ‘special performance bonus’ for its president and closure of its leasing company.

According to official documents seen by Dawn, the government-run bank has convened an “extraordinary general meeting’ on Dec 18 to approve two ‘special business items’. These include a Rs17 million bonus for President Syed Ahmed Iqbal Ashraf for his ‘outstanding performance’ in fiscal year 2014. He receives a salary of Rs3.5m and the bonus will raise his annual earnings from Rs42m to Rs59m, a 41 per cent increase.

Informed sources said that while approving compensation package for the president, the bank’s shareholders had decided that the performance bonus for him would be recommended by the board of directors and approved by the shareholders on the basis of ‘performance indicators’ and in comparison to presidents of peer banks.

But the NBP management or the board of directors had not approved ‘performance indicators’ nor discussed them with the shareholders, they said. Similarly no comparison of bonus for Mr Ashraf’s with those of presidents of peer banks has been brought before the board or the shareholders.

The sources said that Mr Ashraf had proposed for himself Rs17m bonus as the bank had earned Rs15 billion profit for the year ending on Dec 31, 2014 and in the light of bonuses given to senior executive vice presidents of the bank in 2012 and 1213.

They said that the NBP had given lucrative performance bonuses to senior executives, including those who were holding key positions when the bank lost over Rs18bn in its Bangladesh operations because of poor quality advances, monitoring and supervision.

The bonus proposal comes at a time when the State Bank of Pakistan has restricted Mr Ashraf from hiring or promoting key executives, group heads and other senior officials without its prior clearance because of governance-related issued faced by the country’s largest bank.

At a recent meeting, none of the eight directors on the board was interested in a resolution moved for special bonus to the president, a board member claimed.

When approached, the NBP management declined to comment on the proposed bonus for the president. In response to written questions, NBP spokesman Ibn-ul-Hassan said that the questions were related to Dec 18 meeting and “we cannot give this information or comment on these questions before that meeting. We cannot share this information with media without approval of the shareholders and the stock exchange”.

The sources said that the bank was also working on dissolution of its subsidiary NBP Leasing Limited (NLL) and its amalgamation into the bank. The decision will merge assets, rights and obligations etc of the NLL into the bank which will then be parked in the bank’s Islamic operations.

The NBP management also declined to explain reasons behind the proposed merger and the financial position of the NLL leading to its proposed dissolution.

The sources said the NBP had earned around Rs15bn profit last year but its return on assets and equity were on the decline and lower than of other banks.

The return on assets, they said, was little over one per cent in 2014 which had fallen from over two per cent a few years ago.

They said that the NBP had higher non-performance loans when compared with other banks and the number of its branches with losses was also increasing.

 

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