Talk of turnaround stories and The Bank of Punjab's (BoP) is one really big one. Once a sinking ship, the public sector bank has moved from strength to strength over the years. The BoP announced its audited CY15 financial results last week, recording a stupendous 75 percent year-on-year growth in pre-tax profits.
Mark-up earned grew modestly in CY15, which is understandable as the interest rates went down to a multiyear low. The bank's asset base expanded considerably during the year, with investments and advances growing 14 and 29 percent, respectively. The bank's ADR soared to well-above industry average, at 58 percent, up from nearly 50 percent, in the year ago period.
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The deposit base expanded 10 percent over last year, almost at par with industry average. Understandably, the CASA ratios at public banks are not reminiscent of large private sector commercial banks, for a variety of reasons. That said the BoP has been improving on its deposit mix, gradually. The net mark-up income grew admirably at 23 percent year-on-year. The legacy of bad loans on its books continues to adversely impact the profits - as provisioning charges during CY15 nearly trebled year-on-year, wiping out the good work at the top.
And then came the saviour - the non-mark-up income. CY15, for banks, was largely built around manifold increase in non-core income, mainly on the back of gain on sale of securities. The BoP was no exception to the rule, and pounced on the opportunity, recording impressive capital gains.
The bank has also announced un-audited results for 1QCY16 - and that too, is nothing short of impressive. Yes, the profit growth is not as high as CY15, but that was an industry wide phenomenon during 1QCY16. The bank seems to have further improved cost of deposits from CY15, as evident by a bettered gross spreads ratio.
While, the non-core income stayed on the lower side, as most of the juice had already been extracted last year, the respite this quarter came from provision charges, which reduced year-on-year. The bank has not shied away from lending and continuously takes up challenging projects. The management has surely done things right. It is not often, you talk about exemplary profit numbers at state-owned institutions - and that too, when they are in direct competition with a highly sophisticated private sector.
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