KARACHI, March 18: The banks administrative expenses shot up by average 27 per cent during the year ended on December 31, 2007.

This lavish spending by banks carried huge burden of salaries of their executives and CEOs (chief executive officers), which went beyond the previous records.

The administrative expenditure (including salaries) rose to Rs108.638 billion, which was 27 per cent higher than last year.

Annual reports of 90 per cent listed banks showed that banks increased salaries of their high ups without caring about the depositors, whose money make them rich.

The depositors are getting negative return from the banks, which have been making record profits for last four years but kept most of the profits by themselves. The huge increase in salaries of executives and CEOs reflects the real causes of negative return to the depositors.

Salaries and allowances of executives of banks rose by 55.5 per cent compared to previous year. The total salaries of executives in terms of amount increased to Rs11.203 billion compared to Rs7.202 billion earlier.

The weight of executive directors’ salaries has increased from 15 per cent to 19 per cent. The total weight of salaries rose by 25 per cent from 21 per cent.

Salaries of chief executives also increased heavily. The total increases in the salaries of CEOs were 124 per cent. The CEOs withdrew a total Rs1.075 billion against Rs479 million of previous year.

Among the listed banks, MCB Bank was the only one, which slashed its administrative expenses by 23 per cent and increased the salaries by 24 per cent. All other banks increased both the expenses and salaries.

Banks have been making record profits for at least four years but they increased their spending with new expansion plans and very high salaries of the executive directors.

The profits were not shared with the depositors. Despite several assurances by the State Bank for a better return to the depositors, the banking spread was still highest in the region. Higher banking spread of 7.3 per cent means banks keep most of the profits they earned, while the depositors suffer with negative return.

The State Bank last month increased the discount rate providing more opportunity for banks to increase the lending rates or invest in government papers, including Treasury bills to book higher profits. These higher interest rates would yield more money to the banks but the SBP failed to reduce the miseries of the depositors.

In the wake of higher inflation, which has already reached close to the double-digits, the depositors would suffer with the poor average return of about 4.5 to 5 per cent.

The poor return is the real the real cause of low saving rate in the country, which is also the lowest in the region.

“The low saving rate, which is the direct impact of discouraging return to depositors, is damaging for the economic growth,” said Mohammad Imran, head of research at First Capital Securities.

He said low saving rate means low investment and the output would be a lower economic growth. However, Mr Imran said the banking spread had started declining and would reduce in the coming years, which would mean better return for depositors.