Commercial Banks: PICIC COMMERCIAL BANK LIMITED - Year Ended December 31, 2006 (Audited)
PICIC Commercial Bank Limited (PICIC Bank) was originally incorporated in Pakistan on December 27, 1993 as a public limited company under the name of Schön Bank Limited.
The bank received license from the State Bank of Pakistan to undertake and carry on the business of banking in Pakistan on April 3, 1994. In 1997, Al-Ahlia Portfolio Securities Company, Sultanate of Oman acquired the major shareholding and changed Bank's name to Gulf Commercial Bank. Thereafter, in February 2001, the Bank's management again changed when PICIC acquired 60% controlling shares from Al-Ahlia and changed its name to PICIC Commercial Bank Limited in May 2001.
PICIC Bank is listed on the Karachi, Lahore and Islamabad Stock Exchanges and operates 129 (2005: 115) branches inside Pakistan and has obtained permission from State Bank of Pakistan to open additional 20 branches during the year 2007. Total number of employees of PICIC Bank as on December 31, 2006 was 1,647 including 385 outsourced employees (2005: 1,530 including 366 outsourced employees).
According to notes to the financial statements, PICIC Bank on December 31, 2006 was required to raise the paid up capital to Rs 3 billion to comply with the BSD Circular No 6 dated October 28, 2005 issued by the State Bank of Pakistan (SBP).
However, in view of expected acquisition of majority shares of PICIC, the holding company of the bank, by NIB Bank Limited (backed by Temasek Group of Singapore) for which a due diligence exercise is presently being carried out, SBP has, at bank's request, advised that if the deal of acquisition between PICIC and NIB Bank Limited is executed, PCBL would be exempted from compliance with the said circular till the completion of acquisition formalities. The bank's Board of Directors has also undertaken that PICIC Bank will immediately meet the shortfall in paid up capital if the acquisition does not materialize.
It may be mentioned that in June 2005, Temasek Holdings, an investment arm of the Government of Singapore, through its indirect subsidiary Bugis Investments (Mauritius) Pte. Limited, had acquired over 70% shares in the capital of NIB Bank Limited. Temasek Holdings was reportedly established in 1974 and manages a diversified portfolio of Singapore $103 billion in companies that are based in Singapore, Asia and OECD countries.
The authorised capital of PICIC Bank is Rs 3 billion, comprising 300 million shares of Rs 10 each. As on December 31, 2006 the paid up capital was Rs 2.735 billion, which was held by 12,462 shareholders, of which 10,807 local individuals held over 18% shares. Foreign individuals (1,414 in number) held nearly 12% of the total shares. Sulaiman Ahmed Saeed Al-Hoqani held nearly 11% voting interest. The rest of the shares were distributed among a number of corporate entities including banks and DFIs.
PICIC Bank saw only 8% increase in its Total Assets to Rs 70 billion as on December 31, 2006 compared to Rs 65 billion on December 31, 2005. The increase in Total Assets has been managed largely through additional Deposits. Growth in Total Assets has not been achieved through corresponding increase in Equity, which as a percentage of Total Assets has reduced to 5.8% (December 31, 2005: 6.2%). Of the total, PICIC Bank has 78% Investments in Available-for-Sale Securities while 23% are in Held-to-Maturity Securities.
PICIC Bank's Advances as on December 31, 2006 were at Rs 34.884 billion (50% of Total Assets), showing 5% increase over Rs 33.162 billion Advances on December 31, 2005 (51% of TA). As on December 31, 2006, gross NPLs were Rs 1.759 billion (December 31, 2005: Rs 0.586 billion). In percentage terms gross NPLs on December 31, 2006 were 4.9% of gross Advances (2005: 1.8% of GA). Provision has been made as required.
Very low level of NPLs as shown above could be the result of PICIC Bank's prudent strategy to lend to the right type of customers. However, as some doubtful loans have the tendency to stay under cover for sometime due to different reasons, a prudent policy for PICIC Bank would be that the management remains extra vigilant in the appraisal and monitoring of all loans.
Deposits with PICIC Bank as on December 31, 2006 constitute 85% of Total Assets (2005: 82% of TA). Total liabilities are about 16.2 times of the equity (2005: 15 times). According to the notes to the financial statements, Capital Adequacy Ratio of the bank works out to 9.88% as on December 31, 2006 (2005: 9.42%) as against prescribed minimum equivalent to 8% of the risk weighted assets of the banking company.
Total mark up income of PICIC Bank for the year ended December 31, 2006 increased by 39% to Rs 5,796 million compared to Rs 4,172 million for the previous year. Net mark up income (after mark up expensed and provisions) for the period under review declined by 15% to Rs 1,789 million (2005: Rs 2,100 million). This drop in profitability was largely due to provisions against NPLs this year of Rs 476 million (2005: Rs 9 million) and also due to larger mark up expenses. Total mark up-interest expense increased by 71% and represented 61% of total mark up income for the year ended December 31, 2006 compared to 49% for 2005.
Non-mark up income of the bank for the year ended December 31, 2006 was 11% lower at Rs 857 million as against Rs 958 million for 2005. This was due largely to lower gain on sale of securities as compared to the previous year. The year under review was closed with After-tax Profit at Rs 969 million (2005: Rs 1,504 million), registering 36% decrease from the previous year. Performance statistics are given below.
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Performance Statistics (Audited)
(Rs million)
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Balance Sheet (As on December 31,) 2006 2005
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Total Assets: 70,290 65,129
Cash, balances with banks: 7,755 6,735
Investments-Net: 15,661 13,658
Advances-Net: 34,884 33,162
Borrowing from fin. Institutions: 5,024 5,680
Deposits, other accounts: 59,468 53,468
Total Liabilities: 66,214 61,071
Net Assets: 4,076 4,058
Share Capital: 2,735 2,735
Reserves & Un-app. Profit: 1,736 1,451
Equity: 4,471 4,186
Surplus on Revalue, Assets: -395 -128
Equity incl. Revalue Surplus: 4,076 4,058
Advances-Gross: 35,587 33,439
Gross NPLs: 1,759 586
Total Provision: 703 277
Conting. & Commitments: 18,597 26,231
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Ratios:
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Cash & bank/Total Assets: 11% 10%
Investments/Total Assets: 22% 21%
Advance-Net/Total Assets: 50% 51%
NPLs/Advances-Gross: 4.9% 1.8%
Provisions./Advances-Gross: 2.0% 0.8%
Deposits/Total Assets: 85% 82%
Total Liabilities/Total Assets: 94% 94%
Total Liabilities/Total Equity-X: 16.2 15.0
Total Equity/Total Assets: 5.8% 6.2%
Deposits/Equity-Times: 14.6 13.2
Advances/Deposits: 59% 62%
Investments/Deposits: 26% 26%
Conting. & Comm./Equity-Times: 4.56 6.46
Book Value Per Share: 14.90 14.84
Quoted share price (6-04-07) - Rs: 34.60 -
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Income Statement 2006 2005
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Markup-interest earned: 5,796 4,172
Markup-interest expensed: 3,530 2,062
Net Markup-interest income: 2,266 2,110
Provisions and write offs: 477 10
Net mark up income (aft. Prov.): 1,789 2,100
Total non-markup income: 857 959
Income bef. Admn. Exp.: 2,646 3,059
Admin Expenses, etc: 1,367 1,153
Profit before Taxation: 1,279 1,906
Current & deferred tax: 310 402
Profit after taxation: 969 1,504
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Ratios: (Annual Basis)
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Markup earned/Total Assets: 8.2% 6.4%
Net Markup Income/TA: 3.2% 3.2%
Net markup (aft. Prov.)/TA: 2.5% 3.2%
Non-Markup Income/TA: 1.2% 1.5%
Income before Admn. Exp./TA: 3.8% 4.7%
Admin Expenses/TA: 1.9% 1.8%
Profit before Taxation/TA: 1.8% 2.9%
Profit after Taxation/TA: 1.4% 2.3%
Profit after Tax/Total Equity: 23.8% 37.1%
EPS-(year-end paid up) - Rs: 3.54 5.50
Price/Earnings ratio: 9.77 -
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Cash flow Summary 2006 2005
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Net Cash flow, Operations: 4,125 4,073
Net Cash flow, Investing: -2,303 -892
Net Cash flow, financing: -802 -733
Change in Net Liquidity*: 1,020 2,448
Net Liquidity at beginning: 6,735 4,287
Net Liquidity at end: 7,755 6,735
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COMPANY INFORMATION: : Chairman: Muhammad Ali Khoja; President and CEO: Zafar H. Naqvi; Director: Manzoor Ahmed; Company Secretary: Rahat Saeed Khan; Chief Financial Officer: Akbar A. Ladak; Auditors: KPMG Taseer Hadi & Co, Chartered Accountants; Registered Office: 2nd & 3rd floor, Spencer's Building, I.I. Chundrigar Road, Karachi; Web Address: www.picicbank.com.pk
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