The much-awaited financial statements of the Bank of Punjab (BoP) have been released. The bank had been allowed a period of three years during which it did not release its annual statements publicly, so the result announced last week drew a line under its recent troubles with a positive bottom line reported for CY11. The bank clocked in a net profit of Rs348 million in CY11, after recording a loss three years in a row (CY10-08). Although BoP has come a long way, the underwhelming fact is that the bank registered net mark-up losses in CY11, and it is primarily the reversal of provisioning against non-performing loans which has provided a support to its bottom-line in CY11. The reversal of provisions against non-performing loans and advances (net) stood at around three billion rupees in CY11. Credit goes to the management which took charge from Hamesh Khan & Company and has worked against the tide not to recover big chunks of advances but restructured and sustained many small toxic assets given across the industries without much scrutiny and prudence under the helm of previous management. The banks net mark-up has been in the red zone since CY09, but the good part is that the BoP managed to squeeze net mark-up losses in CY11. This is natural, as the new senior management took charge with stigma on the Banks name, it had to offer more incentive to lure any deposit other than Government of Punjab in. Seeing is believing - now with a green bottom line, branch managers are in better negotiating power. And its a renewed challenge for top management to bring the cost of funds down and compete on spreads to peers. Buoyed by an expansion in its asset base, the banks top-line marks an average annual growth of around 15 percent in CY11 and CY10. The lenders asset base glided to Rs281 billion at the end of CY11, registering a CAGR of 15 percent during the past three years (CY11-08). Following an industry wide-trend, BoP tilted its asset portfolio towards investments, with an investment to deposit ratio (IDR) of around 39 percent at the end of CY11, as opposed to 14 percent at the end of CY08. Bearing fruits of the new managements efforts to strengthen the banks deposit base, BoPs deposit base witnessed CAGR of around 13 percent during the past three years and its CASA ratio improved by nine percentage points to 53 percent at the end of CY11. The income contribution from non core banking avenues stayed close to around two billion rupees during the past three years. While the growth in administrative expenses stayed close to inflation, with an average annual growth of around 12 percent in the past three years. A key strain on the banks performance was the rise in its non-performing loans, as these toxic loans grew by 73 percent to Rs 74 billion at the end of CY11, relative to the same period in CY08. However, it is pertinent to note that the industrys (all banks) NPLs grew by 69 percent during the period under review. The rise in toxic loans lifted the banks infection ratio to 48 percent in CY11, nearly 20 percentage points higher than the infection ratio at the end of CY08. However, the banks infection ratio is at an alarmingly high level compared to the industry, with all banks average infection ratio close to 16 percent. The rise in toxic loans significantly deteriorated the coverage ratio, which fell to 36 percent as on December 31, 2011, from around 50 percent at the end of December, 2008. Nonetheless, worse seems to be over. Now its time to regain equity. The challenge is to capitalise in a phased manner - Rs17 billions injection by the GoP to bring sanity to the banks equity which is now meeting the SBP minimum capital requirement despite Rs14 billion accumulated losses. The revelation of financial performance raises the question, has this bank managed to regain the confidence of the public? Given that the bank has not turned the corner yet - after a period of amnesty, it is easy to pick holes in the current performance of the bank. BoPs share price fell by 2.5 percent to Rs8.98 on Monday, when the KSE 100-index eased down by around 0.7 percent. However, since the start of the CY12, the banks share price has improved by 66 percent as opposed to 20 percent gain in the index.
============================================================= The Bank of Punjab ============================================================= (Rs mn) CY11 CY10 CY09 ============================================================= Markup Earned 20,685 18,220 15,642 Markup Expensed (21,073) (18,802) (19,022) Net Markup Income (388) (581) (3,381) Provisioning 2,633 (3,320) (10,183) Net Markup income after provision 2,244 (3,902) (13,563) Other income 1,990 1,883 2,219 Operating revenues 1,601 1,302 (1,162) Other expenses (3,711) (4,168) (3,029) Profit/Loss before taxation 523 (6,186) (14,374) Profit after taxation 348 (4,029) (10,069) EPS (Rs) 0.66 (7.62) (19.04) =============================================================
Source: Company accounts
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