AIRLINK 62.48 Increased By ▲ 2.05 (3.39%)
BOP 5.36 Increased By ▲ 0.01 (0.19%)
CNERGY 4.58 Decreased By ▼ -0.02 (-0.43%)
DFML 15.50 Increased By ▲ 0.66 (4.45%)
DGKC 66.40 Increased By ▲ 1.60 (2.47%)
FCCL 17.59 Increased By ▲ 0.73 (4.33%)
FFBL 27.70 Increased By ▲ 2.95 (11.92%)
FFL 9.27 Increased By ▲ 0.21 (2.32%)
GGL 10.06 Increased By ▲ 0.10 (1%)
HBL 105.70 Increased By ▲ 1.49 (1.43%)
HUBC 122.30 Increased By ▲ 4.78 (4.07%)
HUMNL 6.60 Increased By ▲ 0.06 (0.92%)
KEL 4.50 Decreased By ▼ -0.05 (-1.1%)
KOSM 4.48 Decreased By ▼ -0.09 (-1.97%)
MLCF 36.20 Increased By ▲ 0.79 (2.23%)
OGDC 122.92 Increased By ▲ 0.53 (0.43%)
PAEL 23.00 Increased By ▲ 1.09 (4.97%)
PIAA 29.34 Increased By ▲ 2.05 (7.51%)
PIBTL 5.80 Decreased By ▼ -0.14 (-2.36%)
PPL 107.50 Increased By ▲ 0.13 (0.12%)
PRL 27.25 Increased By ▲ 0.74 (2.79%)
PTC 18.07 Increased By ▲ 1.97 (12.24%)
SEARL 53.00 Decreased By ▼ -0.63 (-1.17%)
SNGP 63.21 Increased By ▲ 2.01 (3.28%)
SSGC 10.80 Increased By ▲ 0.05 (0.47%)
TELE 9.20 Increased By ▲ 0.71 (8.36%)
TPLP 11.44 Increased By ▲ 0.86 (8.13%)
TRG 70.86 Increased By ▲ 0.95 (1.36%)
UNITY 23.62 Increased By ▲ 0.11 (0.47%)
WTL 1.28 No Change ▼ 0.00 (0%)
BR100 6,944 Increased By 65.8 (0.96%)
BR30 22,827 Increased By 258.6 (1.15%)
KSE100 67,142 Increased By 594.3 (0.89%)
KSE30 22,090 Increased By 175.1 (0.8%)

With numerous twists and turns in the macroeconomic outlook, CY13 wasn an easy year for the banking sector. The cumulative performance of the five leading banks of the industry (MCB, HBL, NBP, UBL and ABL) speaks volume of that observation.
The cumulative top line of the big five banks could barely muster a little over 1 percent year-on-year growth. Monetary easing until September 2013 and increased focus on investments are the likely culprits behind the skimpy top line growth.
On an individual basis, ABL stood out among its peers with a 10 percent year-on-year growth in the top line, while MCBs top line was worst hit during CY13, losing its ground by 5 percent year on year.
While ABL deserves a pat on the back for a terrific top line growth, it should be noted that the growth came solely on the back of investments which grew by 36 percent year on year in CY13 while advances moved down a tad. Consequently, ABLs Advances-to-Deposit Ratio (ADR) dropped to 44 percent in CY13 from 53 percent in CY12 while its Investment-to-Deposit Ratio (IDR) touched 60 percent in CY13 from 52 percent in CY12.
Among the big five banks, MCB holds the highest IDR of 71 percent and the lowest ADR of 39 percent. NBP is way ahead with the highest ADR of 56 percent, but has the lowest IDR of 36 percent.
The Net Interest Margin (NIM) of the big five banks worsened by 4 percent year on year in CY13. NBP appears to be the main perpetrator with a 12 percent year-on-year drop in the margins. ABL, on the flipside, attained an 18 percent year-on-year growth in NIM and took the lead in this sphere, too.
However, cross-sectional analysis reveals that as of December 2013, MCB had the strongest spread ratio of 58 percent among its peer banks.
The asset quality of all banks, except for NBP, improved during CY13. NBPs non-performing loan portfolio witnessed a 26 percent year-on-year growth, taking its infection ratio to 19 percent in CY13 from 14 percent in CY12. This also triggered the bank to book 83 percent higher provisions in CY13. Compared to NBP, the rest of the pack curtailed their provisioning expense, with MCB booking reversals of Rs2.8 billion.
In terms of asset quality, ABL is the cleanest bank with an infection ratio of 7 percent as of December 2013 while NBP, with a greater inclination towards private sector lending, has the highest infection ratio. ABL also stands out in terms of loan provisioning whereby 95 percent of its bad debts are covered.
ABL, outshining thus far, couldn be the victor when it came to non-core income. A 30 percent year-on-year drop in its non-mark-up income faded the cumulative growth in this category to just 5 percent year on year. MCB, on the other hand boasted the highest, 20 percent year-on-year growth in this category. The sale of Unilever shares by MCB during the period is believed to be the main reason behind this growth.
Mark-up expenses of the big five banks cumulatively grew by 10 percent year on year, thereby squeezing the bottom line by 6 percent year on year. What happened with the top line trickled down to the bottom line as ABL attained the highest bottom line growth of 25 percent year on year while NBPs bottom line shrank by 66 percent year on year.
The improvement in the macroeconomic outlook, which has held inflation and exchange rate stable for quite some time now, will bode well for the banking sector performance.
The banks will eventually work on modifying their deposit-mix to undo the effect of the recent 100 basis points hike in the policy rate on their spreads by mustering current accounts and doing away with the saving and fixed deposits.
Besides, the banks greater inclination towards long-term government bonds instead of T-bills will also give a considerable breathing space to the spreads, thus buttressing the bottom line.
While the banks fortunes are largely expected to improve in the times to come, the wheel of private sector lending that started churning in the 1H FY14 will again likely languish as the banks may find their safe haven in government PIBs offering attractive returns. Hence, they may put their eyes off their core duty--private sector lending.


===============================================================
Big Five Banks (Consolidated P&L)
===============================================================
(Rs mn) CY13 CY12 Chg
===============================================================
Markup Earned 415,534 411,234 1.0%
Markup Expenses 222,083 210,008 6%
Net Markup Income 193,451 201,226 -4%
Provisioning/(Reversal) 20,291 22,853 -11%
Net Markup Income after provision 173,160 178,373 -3%
Non Mark-up/Interest Income 86,118 81,744 5%
Operating Revenues 259,278 260,117 -0.3%
Non Mark-up/Interest Expenses 141,199 128,573 10%
Profit Before Taxation 119,990 134,238 -11%
Taxation 35,192 43,719 -20%
Profit After Taxation 84,798 90,520 -6%
===============================================================

Source: Company Accounts


===========================================
Big Five Banks - Key Performance Indicators
===========================================
(Rs mn) CY13 CY12
===========================================
ADR 46% 51%
IDR 54% 54%
CASA 70% 68%
Infection Ratio 13% 12%
Coverage Ratio 82% 81%
Spread ratio 47% 49%
===========================================

Source: Company Accounts

Comments

Comments are closed.