Pakistani commercial banks post attractive results

Few days back a blog was posted stating that while commercial banks are posting dismal results, Pakistani banks are thriving. This performance can be attributed to government being the biggest borrower. Substantial government borrowing has kept quantum of non-perfuming loans (NPLs) low which yields higher income for the banks. Today results of some of the banks falling in ‘Big-6’ are being presented covering nine months of 2016.

National Bank of Pakistan has posted consolidated profit after tax of Rs13.6 billion (EPS: Rs6.40) for Jan-Sep 2016 period (9MCY16) as compared to net profit of Rs12.3 billion (EPS: Rs5.78) for 9MCY15, up 11%YoY. Sequentially, there was 41%QoQ decline in earnings on the back of 28%QoQ/20%QoQ drop in Net Interest Income/Non-funded income despite lower taxation expense (down 52%QoQ) and higher gains utilization (+53%QoQ). Key 9MCY16 result highlights included: 1) a 3%YoY increase in NII that was down by a substantial 28%QoQ as lower interest rates squeezed margins, 2) provisions were down 78%YoY/16%QoQ reflecting continued asset quality improvement, 3) a 17%YoY/20%QoQ drop in non-interest income on the back of lower capital gains (down 37%YoY) and 4) a manageable 6%YoY increase in expenses. While asset quality continues to improve, the decline in income streams, both interest and non-interest, is surprising.

United Bank has released its Jan-Sep 2016 financial results. Bank’s 9MCY16/3QCY16 earnings were up 9%YoY/4%YoY. While capital gains were judiciously utilized to smoothen earnings, the flashpoint, was the improvement in credit quality with provisions going down by 52%YoY and coverage crossing 90% in 9MCY16. Recoveries, both internationally and domestically have remained strong with the bank marking reversals in the last two quarters consecutively. That said, risks in the form of growth deceleration in non-funded income (31% of total income in 9MCY16), particularly in the bank’s fee income franchise have emerged, prolonging of which can impact revenues. Of particular importance is the slowdown in commission from worker’s remittances (down 40%YoY) on account of weakening Middle Eastern economies. However with oil prices stabilizing now, analysts expect the impact is likely to have played out. Having gained 30% in the last 6months.

Bank of Alfalah has posted profit after tax of Rs6.3 billion (EPS: Rs3.93) for 9MCY16 as compared to net profit of Rs6.0 billion (EPS: Rs3.79) for 9MCY15, up 4%YoY. Sequentially, analysis witnessed 1%QoQ jump in earnings where a 27% QoQ decline in non-funded income restricted earnings to Rs1.9 billion (EPS: R1.2), despite reversals worth Rs78 million and lower taxation expense. Key 9MCY16 result highlights included: 1) a 2%YoY increase in NII however was down 7%QoQ as lower interest rates squeezed margins, 2) provisions were down 75%YoY with reversals worth Rs78 million booked in 3QCY16, 3) non-interest income went down by 27% QoQ on the back of 29%QoQ decline in fee income and capital gains and 4) a manageable 7%YoY increase in expenses.

Faysal Bank has posted a net profit of Rs3.7 billion for Jan-Sep 2016 period, which is 11.4% higher. Markup income for the period under review decreased 20% in the wake of low interest rates. As a result, post-provision net interest income slipped to Rs8.6 billion, down 8.4% from a year ago. Non-interest income of the bank increased 23.8% YoY to Rs5.6 billion. The notable increase in non-interest income was on the back of rising gains on the sale of securities.


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