Askari Bank Limited

Dabbling in risk-free government securities seems to be the favourite past time of the countrys big banks. Askari Bank (AKBL), despite being small, has been following the tide for quite some time now.
An analysis of AKBLs advances vis-à-vis investments over five-year period shows that there is a continuous decline in advances-to-deposit ratio (ADR), while investment-to-deposit ratio has been on the rise.
This is symptomatic of AKBLs cautious lending. Though, not a preferred exercise for the bankers, investment in government securities makes sense for AKBL as it was able to garner significant amount of low cost deposits in the first quarter of 2013 (see CASA ratio).
The banks top line continued to suffer from the same old plight: low interest rates coupled with lower advances made it lose its ground significantly during 1QCY13. However, AKBLs low cost deposits largely soothed the net interest income (NII) by managing mark-up expenses. Resultantly, during the period, gross spread ratio showed some improvement.
Most worrisome are its surging non-performing loans (NPLs) despite vigilant lending off late. Currently, AKBLs toxic loans clock in at 18 percent - the highest level since CY08. During 1QCY13, AKBL proactively availed the relaxation of Rs211 million allowed by SBP to maintain provisions in a time-based manner.
AKBLs bottom line was counting on low provisioning and mark-up expenses. However, a sizeable drop in non mark-up income turned around the scenario by tweaking the bottom line.
With Fauji consortium planning to acquire AKBL in times to come, the forthcoming management is expected to undertake a different approach to get AKBL back into the position of higher profits and less infected portfolio.

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AKBL - KEY RATIOS

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Indicators                1QCY13   1QCY12

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Infection Ratio              18%      16%

Coverage Ratio               72%      73%

Spread Ratio                 30%      28%

Capital Ratio                 5%       5%

IDR                          53%      49%

ADR                          50%      53%

CASA                         73%      68%

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Source: Company Accounts

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ASKARI BANK LIMITED (CONSOLIDATED P&L)

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Rs (mn)                              1QCY13   1QCY12    Chg

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Markup Earned                         7,286    8,542   -15%

Markup Expenses                       5,100    6,174   -17%

Net Markup Income                     2,187    2,368    -8%

Provisioning / (Reveral)                382      462   -17%

Net Markup Income after provisions    1,805    1,906    -5%

Non Mark-up / Interest Income           853    1,051   -19%

Operating Revenues                    2,658    2,957   -10%

Non Mark-up / Interest Expenses       2,236    2,145     4%

Profit Before Taxation                  427      817   -48%

Taxation                                149      229   -35%

Profit After Taxation                   279      588   -53%

EPS (Rs.)                              0.34     0.71

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Source: Company Accounts

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