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.
Source: Company Accounts