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Mighty five: make good money

 Thriving on a large pool of low cost deposit base, a wide reach across the country and the governments insatiable demand for funds, the large banks managed to sail smoothly in CY11. The big five: National Bank of Pakistan (NBP), Habib Bank (HBL), United Bank (UBL), MCB Bank (MCB) and Allied Bank (ABL), churned out a fat bottom line, with combined net profit (unconsolidated) increased by 20 percent to Rs.83 billion in CY11 relative to the previous year. While on a consolidation basis, the group clocked in a combined net profit of around Rs.84.5 billion in CY11. A healthy growth in mark-up revenues is symptomatic of expansion in size of earning assets, with the collective asset base up 14 percent to Rs.4,160 billion at the end of December 2011 relative to the same period of last year. At this level, the big-five banks are roughly holding nearly 53 percent of the industrys (all scheduled banks) total asset base. In the wake of the feeble business environment, the lenders continued interest in risk-free avenues stoked demand for investments in treasury instruments, thereby, the groups combined investment base stretched by 38 percent to Rs.1,526 billion as on 31st December 2011 relative to the same period of last year. This hauled up the average Investment to Deposit Ratio (IDR) by 8 percentage points to 46 percent at the end of December 2011 relative to the same period of last year. The groups IDR is around 4 percentage points shy of the industrys IDR. On the other hand, the collective advances portfolio fell by 1 percent to Rs.1,737 billion as on 31st December 2011 relative to the same period of last year. However, in a group, NBP went against the tide, given that its advances portfolio increased by 10 percent to Rs.525 billion as on 31st December 2011 relative to same period of last year, the remaining four banks registered decline in advance portfolio during the period under consideration. Expansion in deposit base lifted the mark-up expenses. However, the average CASA ratio stood at around 67.5 percent as on 31st December 2011 around 190bps lower compared to the same period of last year. MCB enjoys the highest CASA ratio, at around 79 percent, as on 31st December 2011 while on the other end of the spectrum; NBP holds the lowest CASA ratio at around 57 percent. The average gross spread ratio stood at 55.2 percent in CY11, nearly 65bps lower than the last year. Among the group, MCB enjoys the highest gross spread ratio, at around 65 percent, in CY11, followed by HBL at 57 percent. The group of five big banks recorded hefty growth in income from non-core banking activities. The collective non-interest income as a percentage of total operating revenues stayed close to the last years level of around 22 percent. In the face of growth in non-mark-up expense, the good part is that the banks managed to keep average income to expense ratio close to the last years level of around 2.4 in CY11. Last but not the least, the banks managed to check growth in non-performing loans, given that combined toxic loans reached Rs.238 billion at the end of CY11, marking a jump of 6 percent relative to the same period of last year. Amongst the big five, NBP faces the highest infection ratio of around 14.9 percent, while ABL enjoys the lowest infection ratio at around 7.8 percent.

Top five banks: combined P&L
(Rs mn)                          CY11        CY10     Chg
Markup Earned                382,184     327,563      17%
Markup Expensed             (171,368)   (144,753)     18%
Net Markup Income            210,816     182,810      15%
Provisioning                 (30,598)    (33,635)     -9%
Net Markup income            180,218     149,175      21%
after provisions
Other  income                 59,205      50,709      17%
Operating revenues           270,021     233,519      16%
Other  expenses             (110,566)    (94,074)     18%
Profit before taxation       128,857     105,810      22%
Profit after taxation         83,411      69,435      20%
Source: Company Accounts