Faysal Bank: close to the core

Faysal Bank Limited didn’t tag along the industry-wide practice of effortless banking. FABL’s 1QCY13 result speaks volumes of the bank’s inclination towards core banking activities, as substantiated by its healthy ADR. Conversely, investments took a dip of six percent year-on-year in 1QCY13 with a substantial drop in IDR.
During 1QCY13, the bank undertook several diversified lending transactions to broaden its credit mix. These include funding power sector, agri-corporate farming, textile and real estate projects, to name a few.
FABL has been doing what banks should essentially do. However, private sector lending is hardly scot-free exercise. The bank’s non-performing loans have been surging of late, with its infection ratio standing at a worrying 16 percent in 1QCY13.
The reduced cost of deposits provided a much need breather. With a sizeable growth in its low cost deposits (see CASA ratio), FABL’s cost of funds dropped from 6.6 percent to 5.4 percent in 1QCY13. This pushed FABL’s spread ratio close to mid-sized banks’ average of around 40 percent.
What largely spoiled the bottom line growth was the provisioning charge that grew by a whopping 129 percent. According to the bank’s management, the increase in provisioning is mainly due to subjective provisioning, additional provisioning upon downgrading and withdrawal of FSV benefit during the quarter.
During 1QCY13, FABL has sought relaxation from the SBP to hold back the provision of its two classified loans of nearly Rs 576 million advanced to Agritech and Azgard Nine. Had the SBP not granted this exemption, the profit before taxation for the current period would have been lower by Rs 1368.103 million.
To shield its bottom line from further slide, FABL wisely managed its administrative expenses and was able to keep it constant despite inflationary pressures.
As FABL is booking provisions on the NPLs of Agritech and Azgard Nine in a phased manner, the provisioning expense is likely to grow further. However, the bank’s laudable performance to garner low cost deposits will surely keep FABL’s bottom line healthy.

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FABL - KEY RATIOS

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Indicators               1QCY13     1QCY12

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Infection Ratio             16%        17%

Coverage Ratio              69%        66%

Spread Ratio                35%        25%

Capital Ratio                6%         6%

IDR                         36%        43%

ADR                         72%        75%

CASA                        62%        55%

ROA                        0.1%       0.1%

ROE                          1%         1%

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Source: Company Accounts

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FAYSAL BANK LIMITED - INCOME STATEMENT

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Rs (mn)                               Chg     1QCY13     1QCY12

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Markup Earned                         -3%      6,583      6,777

Markup Expenses                      -15%      4,292      5,055

Net Markup Income                     33%      2,290      1,722

Provisioning                         129%        457        199

Net Markup Income after provisions    20%      1,833      1,522

Non Mark-up / Interest Income        -24%      1,046      1,375

Operating Revenues                    -1%      2,879      2,897

Non Mark-up / Interest Expenses        0%      2,560      2,559

Profit Before Taxation                -6%        319        338

Taxation                             -22%         56         72

Profit After Taxation                 -2%        263        267

EPS (Rs.)                                       0.28       0.29

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Source: Company Accounts

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