Hardly any commercial bank today in Pakistan carries an Advances-to-Deposit Ratio (ADR) in excess of 50 percent. National Bank of Pakistan (NBP) is an exception, as quite contrary to the industry wide trend, NBPs ADR at the year end 2012 was recorded at a healthy 64 percent. Being state-owned definitely helps, which does not make the comparison with other similar sized banks, an apple-to-apple one. Yet, the NBP is doing what banks are supposed to do--lending.
NBP announced its CY12 annual financial results on Monday, surprising many with a 15 percent stock dividend along with 70 percent cash dividend. The profits for the year; however, dwindled by 5 percent year on year. Subdued NII coupled with uncontrolled administrative expenses, wiped out the good work done on the non-operating income front.
Quite in line with the industry trend, NBPs top line growth remained modest, as the low interest rate scenario restricted the mark-up income, despite a 25 percent and 7 percent increase in advances and investment, respectively, over last year. The deposit growth was a reasonable 12 percent over December 2011, with deposits crossing the trillion rupees landmark.
Expectedly, the NII fell from the year-ago level as the gross spread ratio squeezed to 44 percent for the year, from 49.4 percent in 2011. An improved CASA ratio of 62 percent (Year end 2011: 57 percent) prevented a further decline in NII. Relief came from the provision charges, as the asset quality improved. The NPLs increased by just 1 percent, with a much improved coverage ratio of 82 percent.
A significant contributor to the bottom line was the other income as NBP performed impressively on account of brokerage and dividend income. That said, the good work was undone by a massive hike in administrative expenses, which surged by a whopping 18 percent.
Going forward, NBPs much improved asset quality bodes well for future profitability as provisioning charges are expected to remain in check. A lot will depend on how the interest rate scenario pans, which may or may not result in more aggressive lending. NBP will have to keep a lid over the administrative expenses, if it has to show higher profits in such times of low interest rates.
NATIONAL BANK OF PAKISTAN
(Rs mn) CY12 CY11 chg
Mark-up Earned 101,126 95,956 5%
Mark-up Expensed (56,552) (48,567) 16%
Net Markup Income 44,573 47,389 -6%
Provisioning (8,019) (9,358) -14%
Net Mark-up income after provisions 36,554 38,031 -4%
Other income 24,805 19,738 26%
Operating revenues 69,378 67,128 3%
Other expenses (37,295) (31,638) 18%
Profit before taxation 24,063 26,132 -8%
Profit after taxation 16,887 17,725 -5%
EPS (Rs) 9.13 9.58