Whether its a big fish in a small pond or a large bank in a growing economy, both leverage the benefit of their size and reach.
Aided by an improvement in net interest income, along with the decline in net provisioning against loans and advances, the combined profits of the five largest banks - MCB, UBL, ABL, NBP and HBL - rose to around Rs69 billion in 2010, marking an annual increase of 13 percent.
Capitalising on their wide branch network and strong brand names, amid a 16 percent growth in the money supply, these top-notch banks cumulatively expanded their deposit base to Rs2,906 billion in 2010 from around Rs2,569 billion a year earlier - a growth of 13 percent.
With prudent lending becoming the order of the day to check rising non-performing loans, the aggregated advances remained static at last years level. However, the saving grace came from the improvement in the CASA ratio, which surged by 2 percentage points to 70 percent, and higher earnings from investments, resulting in a cumulative 10 percent annual growth in net markup income.
Induced by a lucrative return on government papers, the top five banks increased their investment portfolio by 34 percent, raising the collective IDR (investment-to-deposit ratio) by 6 percentage points to 38 percent in 2010.
As MCB remained the most aggressive in branch expansion and deposit gathering, it faced the highest growth rate in markup expenses. MCBs CASA ratio deteriorated by 2 percentage points to 79 percent, yet its cost of deposits remains the lowest among other peer banks.
In contrast, NBPs CASA ratio, the smallest in the big-five group, improved with the biggest jump of 3 percentage points to 64 percent in 2010. Barring UBL and ABL, all other three banks witnessed growth in markup expenses.
ABL remained the most generous in lending, with a 7 percent growth in advances and the highest ADR ratio standing at around 68 percent, as it enjoys the lowest infection ratio.
Quite the reverse, UBL remained the most tightfisted in lending and, instead, showed a strong appetite for investments during the year, as its IDR saw a major jump, advancing by 13 percentage points to 41 percent. This change must have been driven by a tremendous growth in UBLs NPLs in 2010, which expanded by around a quarter to Rs 48.5 billion.
As the cumulative non-performing loans of the five largest banks inched up by a whopping 17 percent, amid stagnant advances growth, the collective infection ratio surged by 2 percentage points to 12 percent. NBP faces the highest infection ratio of around 16 percent.
Non-interest income remained closed to last years level, as growth in commission and brokerage income and dealing in foreign currencies was offset by the decline in income from dividends and lower gain on sale of securities. In keeping with the 12 percent growth in administrative expenses, the combined non-markup expenses surged by 11 percent.
On the operation front, MCB remained the most efficient as its administrative expenses as a percentage of revenue and per branch are the lowest.