Profile, Shaukat Tarin

By Amir Zia
Monday, July 25, 2011
Money Matters
The News

A Trendsetter

As a veteran banker, Tarin gets the credit of pioneering consumer banking in Pakistan.As a finance minister, he kept the IMF programme on track and managed to evolve a consensus on the NFC

There are only a handful of bankers in Pakistan who can be called trendsetters in the industry or boast a larger than life public image. Shaukat Tarin, undoubtedly, belongs to this elite group of professionals, who made their mark not just on the national banking scene, but internationally.
Tarin gets the credit of pioneering consumer banking in Pakistan, playing a key role as a member of the small team that pulled the loss-making nationalised banks out of the red and of introducing the culture of high-end services for customers in the local banks. In his 16-month stint at the Finance Ministry — first as an advisor and then a minister — Tarin managed to give the country a consensus National Finance Commission (NFC) Award and kept the International Monetary Fund (IMF)-backed reform process on track despite political pressures. Both in the banking industry and the finance ministry, he is known as a headstrong, candid and dynamic person, who can withstand pressure and go against the current.
“He is a tough and demanding boss,” said Muneer Kamal, one of his old associates of the Citi and Union Bank days. “As a senior, he teaches you a lot. But he is not a micro-manager. He gives space and autonomy to subordinates and allows them to grow, which is the hallmark of a great boss,” said Kamal, who is now the Chairman of the Karachi Stock Exchange and Vice Chairman of the KASB Group.
Sakib Sherani, a former principal advisor to the finance ministry, shares the same views. “He used to give full authority and backing to his team.”
“I found him an upright person,” Sherani said. “I never saw him work for his Silkbank when he was finance minister. Mindful of the clash of interest, he had built the Great Wall of China around him. He led by example, walking into the office before 9 am and was always the last one to leave. This reflects his dedication to his work.”
Born on October 1, 1953 in Multan to a military doctor, Tarin as a teenager dreamt of becoming an entrepreneur. “My father, Jamshaid Tarin, was a veteran of the Pakistan Movement and remained president of the Muslim Students Federation Punjab. He wanted me to join the civil service or become an aeronautical engineer.”
But destiny had other plans.
In 1971, Tarin’s father was transferred with his unit to the former East Pakistan where he became a prisoner of war. During his father’s more than two-year ordeal in Indian captivity, the young man got the freedom to exercise his will and he took admission in an MBA course. Although Tarin got selected for aeronautical engineering, he refused to join the Air Force. Instead, he joined Citibank with the aim of giving 10-15 years to this profession and then starting his own business. “I always thought that bankers knew which businesses would succeed. My plan was to spend a few years in banking and then go for my own business. But it took me more than two decades to do that.”
Tarin had an uninterrupted 22-year-long association with Citibank. He worked both in Pakistan and abroad, getting important postings, including Dubai and Bangkok. Tarin’s first big breakthrough came in Pakistan in 1990 when he was made Citibank’s head of consumer banking. This helped establish his reputation as a dynamic banker and won him the title of “father of consumer banking in Pakistan” from admirers. For the first time in Pakistan, he introduced large-scale consumer lending that included credit cards and auto and house financing, targeting the growing middle and upper middle classes. His next and even bigger assignment was in Thailand where he was posted as Citibank’s country manager.
In 1997, the then prime minister, Nawaz Sharif, asked Tarin to head the Pakistan International Airlines, but he refused, citing lack of expertise in the field. Sharif agreed and later offered him to head the Habib Bank Limited (HBL), which was then in the red because of overstaffing, bad loans and poor management.
Tarin did not personally know Sharif and was introduced to him through a common friend. Sharif assured Tarin of independence and non-interference in running the bank’s affairs. “I took the plunge and returned to Pakistan, leaving the Citibank job which paid close to a million dollars annually. At HBL, my take-home was 175,000 rupees along with the school fees of my children and a portion of my house rent. I had to eat into my savings to remain afloat.”
Although Tarin describes his 18 months at HBL as “torturous,” he managed to revive the country’s ailing banking sector along with his peers in the other state-run banks. But Tarin got on the wrong side of Sharif on the yellow cab and housing schemes, which he refused to back because he feared poor loan recovery. Differences with Sharif forced Tarin to seek other options. While serving at HBL, he along with his partners acquired the struggling Union Bank. The deal was closed in August 1999. Tarin operated from behind the scenes during the deal and formally joined Union Bank in May 2000.
The Union Bank proved another feather in Tarin’s cap as within six years, it was ranked among the top 10 Pakistani banks with an asset size of 1,122 billion rupees compared with 14 billion rupees when it changed hands. Tarin bought the operations of several other banks, including Bank of America and American Express cards, and replicated the model of consumer lending at a larger scale.
“As a local bank, our motto was to provide first-class customer service, which was the domain of foreign banks.”
Pakistan’s relatively stable political conditions, low interest rates and a booming economy under Musharraf provided a perfect environment for Union Bank.
“In Union Bank, we managed to galvanise different working cultures,” Tarin said. “Unless the team is motivated and everyone pulls together in one direction, one cannot deliver.”
Then what made Tarin sell Union Bank?
Tarin says differences with partners.
“I like to do things professionally and don’t like interference.”
In 2006, Tarin managed to strike a dream deal worth $487 million with the Standard Chartered Bank (SCB) for the sale of Union Bank. “The deal gave 18 times the return on assets,” Tarin said.
Tarin explained that SCB struck the deal after 10 weeks of due diligence, in which 80 people were involved.
“SCB’s problem was that of integration with the new acquisition,” he said brushing aside the question that Union Bank was sold for much more than its worth.
In March 2008, Tarin and his partners bought the Saudi-Pak Commercial Bank. Tarin was working as its president when he was assigned the task to lead the finance ministry as an advisor. But the deal with Saudi-Pak — renamed Silkbank in 2009 — proved challenging as the country’s economy got caught in the low-growth and high-inflation cycle amidst political instability and the rising wave of terrorism. The fact that Tarin pulled himself out of the bank’s operations also impacted its performance.
At the Finance Ministry, Tarin faced bigger challenges. “I took charge of the ministry in October 2008 when the country faced the risk of default,” Tarin said. “At that time, we were not in a position to go beyond December.”
Friends of Pakistan promised help but they needed a referee, he said. “Only China gave $500 million without any conditions.”
The Pakistan economy had been shaken by external and internal shocks. Inflation had peaked to 25 percent and external imbalances expanded due to rising international food and fuel prices as well as terrorism.
“We had no alternate but to go to the IMF,” he said.
Tarin had to perform a high wire act to keep the IMF programme going. The Fund praised his performance as he kept the key economic targets, including the budget deficit, in check.
“Most politicians do not understand what we say,” he said adding that President Asif Ali Zardari and Prime Minister Yousuf Raza Gilani gave him a free hand. Yet, the going was tough with issues like rental power being pushed by vested interests despite their “destructive” economic cost.
In retrospect, Tarin sees the agreement for the distribution of resources between provinces and the federal government under the NFC as a major achievement. But he resigned within months on Feb. 23, 2010 apparently to raise equity for his troubled Silkbank. However, sources close to him say that his sudden departure also stemmed from the fact that he was unable to push unpopular reforms through the cabinet. Tarin says that he remains a satisfied man as his decision to rejoin the banking world helped him pull Silkbank out of trouble. But perhaps the bigger source of solace remains that despite being part of a government swamped by scandals and controversies, Tarin managed to walk out untarnished.