National Banks first quarter results speak volumes of poor governance. Be it the cost of funds or higher infection ratio, the lender struggled throughout the quarter.
Though NBPs deposits base declined by Rs13 billion (1.7%) in the last quarter, in line with industry trends, the mix was rather expensive. Unlike that of its peers, NBPs deposit mix turned costlier by 380 basis points during the period.
Compared to its peers, NBP used to enjoy a better CASA ratio thanks to accounts of government employees and its outreach in far-flung areas, but by March, it accounted for only 65.5 percent of total deposits.
On the lending front, sluggish economic activity and seasonal slowdown ate up Rs18 billion (3.9%) of NBP advances - an erosion similar to that suffered by HBL, MCB and UBL.
From a net advance-to-deposit ratio (ADR) of 57 percent in 2007, when peers boasted a ratio of around 70-75 percent, NBP jacked up its ADR to 65 percent by 2009.
And, this is without treating Rs21 billion worth of unquoted TFCs as advances, which if classified as loans would improve the ADR to 68 percent, which marginally reduced to 67 percent in the last quarter.
Though the lender gained score on arresting the growth in toxic assets significantly, its bad loan infection ratio is worrisome.
While its bad loans increased by Rs1.3 billion during Jan-Mar as against an average Rs3.6 billion in the previous four quarters, NBPs gross infection crossed 14 percent by the end of March.
Being a public sector enterprise, 4.3 percent higher infection ratio than peers is a tell-tale sign of poor governance and lack of human resource expertise.
NBPs provisioning, although marginally higher than the year ago period, remained less than half of the average provisioning booked in the previous three quarters. This narrates some improvement in the banks credit risk department, lately.
Together, higher cost of funds and provisioning reduced the net core income growth to a mere four percent year-on-year during 1QCY10. However, 9 percent growth in NBPs non-core income pushed operating revenues higher by 7 percent.
Despite economies of scale, the state-owned bank couldn put reigns on its administrative costs. NBPs operating expenses soared by 13 percent as compared to less than 5 percent for the rest of three big banks.
Nonetheless, the banks cost to revenue ratio which increased from 0.39 to 0.41 is still compatible to HBL and UBL. MCB, owing to its pension funds investment in its own stock and synergies from big sister concerns, and is sitting as low as 0.26.
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National Bank P&L
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Rs (mn) 1QCY10 1QCY09 Growth
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Mark-up earned 21,036 18,796 12%
Mark-up expensed (10,984) (9,330) 18%
Net mark-up income 10,052 9,467 6%
Provisioning (1,939) (1,701) 14%
Net mark-up income after provisions 8,113 7,765 4%
Non-mark-up income 4,000 3,659 9%
Operating revenues 14,052 13,125 7%
Non-markup expenses (5,810) (5,120) 13%
Profit before taxation 6,304 6,304 0%
Profit after taxation 4,216 4,214 0%
EPS 3.92 3.92
Source: KSE Announcement
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