On a consolidated basis, NBP has posted profit after tax of PkR7.67 billion (EPS: PkR3.60) for 1HCY14 against restated net profit of PkR6.01 billion (EPS: PkR2.83) for 1HCY13, translating into 28%YoY growth.
Had last year’s accounts not been restated (changes to share of associates’ profit and admin expenses), growth would have tapered to 11%YoY. The result was above expectations with the deviation due to higher than expected Net Interest Income (NII) and exceptionally high capital gains.
Key 1HCY14 result highlights include: 1) a 2%YoY reduction in NII, 2) a 66%YoY reduction in total provisions, 3) a 13%YoY non-interest income growth largely due to capital gains and 4) a 12%YoY increase in non-interest expenses.
For 2QCY14 alone, NBP posted net profit of PkR4.44 billion (EPS: PkR2.09), up 79%YoY/38%QoQ making this the best quarter since 1QCY12. Capital gains for the quarter rose to PkR3.83 billion, one of the highest on record which together with a sequential spike in NII, enabled total income to register at record high levels. Despite the high capital gains, deferred tax pushed the overall tax rate for 2QCY14 to 39.3%.
The Bank is strongly capitalized with capital and reserves of PKR 160 billion, which translates into break- up value per share of over PKR 75 per share. The bank’s rating was re-affirmed at “AAA” by JCR VIS Credit Rating Agency in June 2014.
At current levels, the target price of PkR65/share implies an accumulate stance. That said, investors must revisit detailed accounts where asset quality position would be critical.