After four straight weeks of gain, the benchmark KSE index finally eased by some 54 points last week, where leading the pack on Friday was none other than the countrys largest lender - National Bank of Pakistan (NBP).
Despite the announcement of a 21 percent year-on-year growth in the nine-month net profits, NBPs shareholders were anything but pleased with the earnings as the stock plunged 4.5 percent on Friday, very nearly touching the lower circuit breaker. Apparently, a lower-than-expected EPS and zero payout by the lender was the reason for the fall in share price.
A higher interest rate environment and a surge in investments in the first nine months accrued a 17 percent gain in mark-up income. But expensive deposits outpaced the gains by 3 percent over the same period last year, resulting in a 14 percent top line growth year-on-year.
Deposit mobilisation remained weak, advancing a mere 2.3 percent in the period under review, though the banks ratio of current account to savings account increased marginally, as high cost fixed deposits decreased by 42 basis points in the first nine months.
NBP continued its downward trend in the advance-to-deposit ratio, ending the first three quarters at 60 percent. Thats significantly below the industry average of 67 percent.
The falling ADR, down 530 basis points in the nine-month period, remains a cause for concern. Even if seasonal credit offtake is attributed to the below par performance, credit managers at the largest lender have their work cut out for them in the upcoming quarters.
At the same time, investments grew by nearly 19 percent. Preferring the relatively safe government securities has been a trend that NBP has led from the front, given the large size of its treasury operations.
The investment-to-advances ratio surged by nearly 12 percent during the period, closing September at 57.6 percent. This trend is likely to continue as all major banks seem reluctant to open up their credit lines any time soon.
On the back of a higher coverage ratio, reaching nearly 80 percent at September end, provisions for bad loans decreased by 23 percent.
That said, NPLs in the first nine months increased by 6.4 percent. The banks gross infection ratio expanded by 74 basis points, up to nearly 15 percent, which is significantly higher than its peers.
Given the traditions of a public sector organisation, NBP was unable to control its administrative expenses, up almost 25 percent quarter-on-quarter basis. Inflationary pressures alone may not be held responsible for the banks expanding non-core expenses, which expanded by more than 22 percent year-over-year basis.
Owing to its far-reaching presence, the largest lender will have to focus on asset quality in the upcoming quarters, given that the impact of floods will be incorporated in the next reporting period.
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National Bank of Pakistan (NBP)
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P & L (Rs mn) 9M 9M % 3Q 3Q %
CY10 CY09 Chg CY10 CY09 Chg
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Mark-up earned 65,579 55,932 17% 22,108 18,663 18%
Mark-up expenses 33,917 28,248 20% 11,184 9,959 12%
Net Mark-up Income (a) 31,662 27,684 14% 10,924 8,704 25%
Provisioning 6,711 8,773 24% 2,252 3,198 -30%
Net Mark-up income
after provisions 24,951 18,910 32% 8,672 5,507 57%
Non Mark-up income (b) 11,388 11,240 1% 3,088 4,273 -28%
Operating revenues (a+b) 43,050 38,924 11% 14,011 12,978 8%
Non Mark-up expenses 19,709 16,150 22% 6,780 5,470 24%
Profit after taxation 11,363 9,401 21% 3,543 3,120 14%
EPS (Rs) 8.45 6.99 2.63 2.32
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Source: KSE notice
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