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Coronavirus
VERY HIGH Source: covid.gov.pk
Pakistan Deaths
27,072
6824hr
Pakistan Cases
1,218,749
2,92824hr
5.08% positivity
Sindh
448,658
Punjab
419,423
Balochistan
32,707
Islamabad
103,720
KPK
170,391

National Bank of Pakistan (NBP) has continued its strong performance, as reflected by strong profit numbers for 9MCY19. The leading public sector bank racked up revenues at a growth of 20 percent year-on-year, which laid solid foundation for sizeable growth in pre-tax profits. Save for higher effective exchange rate due to imposition of super tax, everything about the profit and loss statement, tells NBP is in a very good shape.

The balance sheet expanded at good pace, with assets growing 8 percent over December 2018, constituting nearly 14 percent of the total industry. Gross advances were marginally higher than December 2018 level, at approximately Rs1.1 trillion. When compared with the same period last year, the advances have increased at a brisk rate of 14.7 percent. The loan to asset contribution was still lower at 31.5 percent.

National Bank of Pakistan
Rs (mn) 9MCY19 9MCY18 chg
Markup Earned 167,388 105,217 59%
Markup Expensed 113,525 61,666 84%
Net Markup Income 53,863 43,551 24%
Non Mark-up / Interest Income 25,573 22,492 14%
Total income 79,436 66,043 20%
Non Mark-up / Interest Expenses 41,362 37,943 9%
Provisioning/(Reversal) 8,892 4,983 78%
Profit Before Taxation 29,182 23,117 26%
Taxation 12,852 6,939 85%
Profit After Taxation 16,331 16,177 1%
EPS (Rs) 7.68 7.60
Source: Company accounts

The NPLs have increased by Rs19 billion or 14 percent over December 2018. The infection ratio, has expectedly soared, as the interest rates went up during the period. NBP’s infection ratio stood at 13.9 percent, higher than 12.6 percent as at December 2018. That said, the NPLs are adequately provided for with a coverage ratio nearing 88 percent.

Nearly all the meaningful asset expansion came from the investments portfolio, which crossed Rs1.5 trillion, having increased by 22 percent over December 2018. The bank’s IDR stood in excess of 51 percent, as NBP’s share in industry’s total investments soared to 15 percent. Given the interest rate scenario, the bank rightly focused on building a portfolio around short-term investments, keeping in mind the risk and capital management strategy. The yield on investments during 9MCY19 improved from 6.97 percent in the same period last year, to 10.52 percent in 9MCY19.

The deposit growth was in check as a 3.6 percent dip was witnessed over December 2018 levels to under Rs2 trillion. The deposit composition was healthy, and the CASA ratio further improved to 83.7 percent, proving vital in an increasing interest rate environment, in lowering markup expenses. The average deposits during the period were higher by 9 percent, and the cost of deposits shot up to 6 percent as compared to 3.5 percent in the same period last year. On the other hand, the yield on advances grew from 8.1 percent in 9McY18 to 11.25 percent in 9MCY19.

Non-funded income constituted one-third of NBP’s total income, having increased by 13.7 percent year-on-year. The growth mainly stemmed from fee, commission, dividend income, and remittance channels – all of which posted growth during the period. The dip came from the gain on sale of securities, which was reflective of the under par performance of the stock market.

Going forward, NBP would be looking to further consolidate its position in the industry, with careful and prudent lending, with an eye or two, on the rising NPLs. The deposit base seems to be growing in the right direction, which should bode well for the NBP to curtail markup expenses. The interest rate cycle may start reversing soon, and with it, a reversal in asset allocation strategy may also be visible. Either way, NBP seems in pretty good shape.

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