NBP goes against the grain

National Bank of Pakistan (NBP), one of the largest commercial banks in the country, failed to excite the market on Thursday, reporting a stale bottom line in its corporate results for 9MCY11. NBPs net profits remained unchanged at Rs.11.4 billion in 9MCY11 over the same period of a year earlier. This is down to lukewarm growth in operating revenue that was offset by a higher provisioning cost and administrative expenses. Over and above, the other four largest banks-MCB, UBL, ABL and HBL-cumulatively registered 29 percent bottom-line growth during the period under review. Net interest income (NII) growth of a paltry 5 percent reported by NBP pales in comparison to other four giant commercial banks as their combined NII rose by 18 percent, year on year in 9MCY11. NBP is hard put to increase its margins as its gross spared ratio remained unchanged at 48 percent in 9MCY11 over the same period of a year ago. It is just another measure through by which NBP ranked lowest among the group of top five banks. As the banks deposit base fell by 4 percent during the first nine months of CY11 to Rs.798 billion at the end of September (when the other four against bank registered growth); NBP lost it position by a whisker, as the largest bank by deposit size to HBL. HBLs deposit base stood at around Rs.802 billion as of September 30, 2011. Following against the tide, the banks advances increased by 7 percent during the first nine months of the current year to Rs.513 billion at the end of September, when the industrys (all commercial banks) advances base fell by 4 percent. Therefore, the banks ADR reached 64 percent at the end of September; a cut above average. On the other hand, NBP saw its investments base drop by 16 percent as opposed to 31 percent growth in the industrys investment portfolio. The banks investment banking activities benefited from higher dividend income-income from dealing in foreign currencies and other incomes. The banks operating revenues to expenses ratio inched down to 2.07 in 9MCY11 from 2.18 in the corresponding period of a year earlier-a notch below the top five banks average of 2.4. Being one of the largest public banks of the country, the market expects NBP to tower head and shoulders above the industry. But, even a cursory glance at its financial performance over the past few years suggests that the bank will likely lose ground to relatively smaller banks.

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National Bank of Pakistan
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(Rs mn)                              9MCY11      9MCY10         chg
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Markup Earned                       69,487      65,891         5.5%
Markup Expensed                    (36,312)    (34,229)        6.1%
Net Markup Income                   33,176      31,662         4.8%
Provisioning                        (7,225)     (6,711)        7.7%
Net Markup income after provision   25,950      24,951         4.0%
Other income                        13,176      11,388        15.7%
Operating revenues                  46,351      43,050         7.7%
Other expenses                     (22,375)    (19,709)       13.5%
Profit before taxation              16,751      16,630         0.7%
Profit after taxation               11,402      11,363         0.3%
EPS                                   6.78        6.76
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Source: Company Accounts