NBP: sluggish in 1QCY13

The first quarter of 2013 appears to be quite sluggish for the second largest bank of the country. Whereas the deposits of its four mighty peers grew by three percent on an average since December 2012, NBPs deposits moved south by 11 percent year-on-year.
A year-on-year downtick of two percent in earning assets, though, doesn seem a big deal. However, against a backdrop of declining interest rates, even a minor slide in earning assets impinged on NBPs top line which shaved off four percentage points during the quarter.
Despite an increase in the low cost deposits (see CASA ratio), mark-up expense reared its ugly head. This might be due to an increase in the minimum rate of saving deposits which constitute over 35 percent of NBPs deposits. This further squeezed the net interest income (NII).
However, what really battered NBPs bottom line was the high provisioning expense mainly on account of reduction in the value of investment. Last year, provision against investment showed a reversal as the bank took advantage of booking reversal of impairment loss against shares; however this opportunity was not available this year.
Conversely, provisions against non performing loans (NPLs) took a breather owing to NBP booking provisions in a phased manner as per SBP policy.
During 1QCY13, NBP realised substantial growth in the non-markup income particularly capital gains on securities and dividend income.
Such non mark-up gains largely propelled banks bottom lines during the first quarter of 2013 as the lower interest rate augmented the value of debt instruments and booming stock market yielded handsome dividend income. However, in the case of NBP, even high non-markup income could not shield bottom line from drastic dropdown.
The decline in NBPs bottom line is the highest among the big five banks. However, on a positive note, NBP still deserves recognition among the big banks for having the highest advances-to-deposit ratio (ADR).
In the future, mark-up expenses may rise further owing to the minimum six percent profit on saving deposit on average balances from 2QCY13. Besides, banks strategy to book provisioning expenses in a phased manner might prop up this expense too.
To make up for the above inevitable circumstances, the bank is preparing itself through venturing high yield, low risk products, low cost deposit mobilization, branch expansion and NPL reduction.

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NBP - Key ratios

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Indicators       31-Mar-13   31-Dec-12

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Infection Ratio        14%         13%

Coverage Ratio         81%         82%

Spread Ratio           37%         41%

Capital Ratio          11%         11%

IDR                    36%         33%

ADR                    70%         63%

CASA                   68%         62%

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National Bank of Pakistan

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Rs (mn)                               chg    1QCY13    1QCY12

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Markup Earned                         -4%    23,936    24,847

Markup Expenses                        4%    15,105    14,557

Net Markup Income                    -14%     8,832    10,290

Provisioning/(Reveral)                        1,210     (546)

Net Markup Income after provisions   -30%     7,622    10,836

Non Mark-up/Interest Income           42%     5,587     3,928

Operating Revenues                   -11%    13,209    14,764

Non Mark-up/Interest Expenses         15%     8,893     7,746

Profit Before Taxation               -38%     4,316     7,018

Taxation                             -43%     1,284     2,247

Profit After Taxation                -36%     3,032     4,771

EPS (Rs.)                                      1.64      2.58

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Source: Company Accounts