Bank of Punjab impresses

Being state-owned comes with the ills of being state-owned. The Bank of Punjab (BoPb) had the misfortune of carrying the legacy for quite some time, but it has turned things around over the past two years, and quite a turnaround it has been. The BoPb announced its audited CY16 financial results, which was accompanied with 70 percent right shares at a premium of Rs2 per share in the proportion of 70 shares for every 100 shares.

The pre-tax profits grew admirably by 7 percent year-on-year, despite a decrease in topline mark-up income. BoPb seems to have done well on limiting its cost of deposits, evident by improved gross spread ratio. BoP is one of the very few banks, with an ADR in excess of 50 percent, but that appears to be driven more by design than choice.

Be that as it may, the advances portfolio grew by a considerable 19 percent over December 2015, keeping the ADR flat at 58 percent. The investments portfolio also continued to grow with the balance sheet, expending by 13 percent over December 2015. The NPLs are receding, though still appear to be on the higher side, as the infection ratio stood at 21 percent as at September end 2016.

The deposit base continues to grow at a brisk pace of 19 percent, higher than peer 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 BoPb has been improving on its deposit mix, gradually.

The most telling contribution came from a massive decline in provisioning charges for the year, which were reduced to one-third of previous year. The non-mark-up income understandably slid, as the contribution from gain on sale of securities returned to normalcy.

Along with the financial statements, BoPb has also shared financial projections for the years ahead. The bank expects after-tax profits to slightly be under pressure in CY17 and CY18, to bounce back in CY19. Bank of Punjab seems to be baking on lending, as it expects the advances portfolio to grow by a massive 24 percent in 2017 over December 2016. Mind you, the profit projections also include the impact of provision charge on account of staggered provisioning requirement of the SBP to discharge Letter of Comfort issued by the Punjab government.