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Efficiency of Banks in Pakistan - EstimationsTable 1 provides descriptive statistics of variables used in the study for 22 banks over the sample period 2006-2010. Fixed assets, staff cost and deposits are inputs while total income, loans & advances and liquid assets are outputs. Values of both inputs and outputs are measured in million rupees. Minimum, maximum Mean, median, standard deviation, skewnes and kurtosis are calculated. The staff cost has a minimum mean value while deposits have the highest standard deviation among all the included variables. Fixed asset has the highest skewnes among all the variables with the maximum value of kurtosis; these high values indicate a continuous rise in the size and volume of the fixed assets. As the banks attract lesser loans and advances at outset of its business and are subject to increase with the time period which cause a high SD in the overall time period and the same phenomenon is reflected in the reported descriptives. Table 2 shows the efficiency scores of all banks included in the sample. It is clear from table 2 that banks show different efficiency scores (CRS) over time period, with Askari, Habib metro Politon, Silk, Dawood and Al Barka bank are most efficient as they get the score of 1 on scale. Meezan bank shows Minimum efficiency score of 0.659 in the sample. In our sample Isl. Banks comprise of 28% of it while Con. banks comprises much greater portion of the sample i.e. 72% of the sample. The efficiency scores recommend 5 banks as most efficient as they have a score of 1, out of which 2 are Isl. Banks and 3 are Con. Banks. In Con.

Banking Atlas Bank shows minimum efficiency on scale because it is a captive bank. It has lesser number of branches and financing facilities for consumer as compared to its counterpart bank. Table 3 provides the efficiency results for Con. and Isl. Banks. Con. Banks demonstrated enhanced efficiency in the year 2006 due to overall improved economic conditions in Pakistan. While efficiency score declined in 2007 onwards due to global financial crunch. Given the deteriorating economic conditions in 2009 Con. Banks were least efficient with the efficiency score of 0.599. The fluctuating/falling efficiency score of the Con. Banks in the year 2007, 2008, 2009 and 2010 provided a terrific opportunity to the Isl. Banks to gain the investor confidence and gained an efficiency score equal to that of Con. Bank and even higher efficiency score in the year 2009 and 2010. There is a recent shift in the market as the efficiency scores of Con. Bank are 0.599 and 0.86 for year 2009 and 2010 respectively while the Islamic Banks had an efficiency score of 1 and 0.979 respectively for the said years. Fundamental difference in the capital structure of Con. Banking and Isl. Banking system makes the earlier one more prone to the financial or economic conditions (as is obvious from the CRS scores of Con. Banks) 1, 0.98, 0.922, 0.599 and.868. Out of all estimated efficiency scores over the sample period for both Con. and Isl. Banks the least efficiency score of 0.599 appears for the Con. Banks and it is in the year 2009. The table 3 also provides the efficiency score for both types of banks by using the VRS. The facts observed by using the CRS are also verified further by using the VRS.

Table 1

Descriptive Statistics (in Mn)
Variables Min. Mean Median Max. SD Skew. Kurt.
Fixed Assets 71.418 7167.328 3002.45 102134 11853.37 5.277 40.714
Staff Cost 145.526 4961.336 2623.991 24252.96 5368.066 1.578 4.942
Deposits 288.762 158523.9 99169.38 1003331 183090.1 1.866 7.169
Total Income 17.334 19516.84 11478.92 147384.5 23412.44 2.267 10.565
Loan and Advances 10.776 151070.6 96994 714659.1 164700.7 1.365 4.271
Liquid Assets 924.691 28526.95 17658.59 149392.8 30110.68 1.513 5.036

Table 2. Efficiency score of All Banks

SR No. Year CRS VRS
1 Allied Bank 0.776 0.923
2 Askari Bank 1 1
3 Bank Alfalah 0.718 0.911
4 MCB Bank Limited 0.861 1
5 NIB Bank 0.953 0.968
6 UBL 0.808 1
7 Bank Al Habib 0.795 0.797
8 Habib metro politon Bank 1 1
9 Standard Chartered bank 0.88 1
10 Soneri Bank 0.840 0.844
11 Faysal bank 0.807 0.812
12 Silk Bank 1 1
13 JS Bank 0.798 0.821
14 KASB Bank 0.773 0.776
15 Habib Bank ltd. 0.778 1
16 Atlas Bank 0.689 0.696
17 Meezan Bank 0.659 1
18 Bank Islami 0.679 0.686
19 Dubai Islamic Bank 0.756 0.756
20 Dawood Islamic Bank 1 1
21 Albaraka Islamic Bank 1 1
22 Emirates global islamic bank 0.755 0.7609

Table 3

SR No. Year CRS VRS
Con. Banks 2006 1 1
Con. Banks 2007 0.985 1
Con. Banks 2008 0.922 0.94
Con. Banks 2009 0.599 0.884
Con. Banks 2010 0.868 0.867
Isl. Banks 2006 1 1
Isl. Banks 2007 0.983 0.988
Isl. Banks 2008 0.921 1
Isl. Banks 2009 1 1
Isl. Banks 2010 0.979 1