Despite a tough acquisition of the defunct KASB Bank, BankIslami Pakistan Limited (BIPL) seems to be on the right track, as evident by CY16 financial results. The topline grew impressively by 15 percent, despite challenging operating environment and in sharp contrast to the industry trend. BIPLs continuously expanding balance sheet played a big role, even though spreads went down due to depressed inters rates during the period.
The financing portfolio soared by a healthy 13 percent, complimented by a 30 percent rise in investments, over December 2015. Recall that Islamic banks have historically had a high-ish ADR, due to the very fact that avenues for investments are limited. BIPLs ADR stood at a healthy 50.5 percent, up from 45 percent in December 2015.
Deposits also continued to grow, albeit, at a much steady rate than the asset side. The good thing is the direction in which BIPL has been adding the deposits of late. The CASA ratio had gone up to 70 percent by the end of September 2016, and the trend is expected to have continued in the last quarter. Resultant, the cost of deposits has also come down considerably, aiding the gross spreads.
Heavy reversals in provisioning charges on the investment and financing portfolio also contributed heavily towards improved net spreads post provisioning. Other income continued to inch up, mainly backed by fee income and gain on sale of securities. Other expenses were slightly on the higher side, but understandably so, as the bank is in the process of rationalizing branch operations post KASB acquisition.
BIBL has upped its game on the consumer financing, especially auto loans, to attract higher yields in a low interest rate environment. The consumer financing portfolio has outpaced the other financing portfolio by quite a distance and BIPL is likely to continue the trend.
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