NIB Bank is doing what most banks in Pakistan are not at the moment: it is lending more than it is investing. But doing what banks are supposed to do comes at a price these days. And NIB seems to have paid that price which is evident from its 9MCY14 financials. The banks after-tax profits went 33 percent down year-on-year, as the provisioning expense took its toll on the bottomline.
The top line grew impressively in double digits. NIB has an uncharacteristically high ADR of over 80 percent, and it is one of the very few banks where advances have grown and investments have shrunk. It is a bit of a surprise, but NIB has not gone bonkers after the PIB bonanza. What really killed the momentum was the resurgence of provision charges. NIB had done wonderfully well to curtail NPLs and had booked reversals last year.
Aggressive provisioning in yesteryears and good efforts put in this year resulted in reversals during the period under review, aiding the post-provisioning income. But provisioning charges are now back to hurt the profits. NIB aims to build a strong customer-based franchise through wholesale, commercial and consumer banking. Rigorous efforts have been put in to streamline the cost of funds and deposits.
NIB also puts emphasis on non mark-up income through cross-selling and had a pretty decent period in this regard. Income generated from fee, commission and dividends did well to arrest the slide caused by provisioning charges. NIB still has some way to go in terms of improving its CASA and improving gross margins, in these times of all-time low spreads.
Being a smallish bank, any significant rise in administrative expenses is bad news for the bottomline, as the base is already small. NIB would definitely need to work on ways to rationalise cost, improve the asset and liability mix and more importantly, lower its NPLs.

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NIB Bank Limited (Unconsolidated P&L)
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Rs (mn)                              9MCY14    9MCY13      chg
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Markup Earned                        11,118     9,793      14%
Markup Expensed                       8,401     7,337      14%
Net Markup Income                     2,718     2,456      11%
Provisioning / (Reversal)               301     (507)
Net Markup Income after provisions    2,417     2,964     -18%
Non Mark-up / Interest Income         3,042     2,359      29%
Operating Revenues                    5,459     5,322       3%
Non Mark-up / Interest Expenses       4,403     3,975      11%
Profit Before Taxation                1,056     1,347     -22%
Taxation                                375       338      11%
Profit After Taxation                   681     1,009     -33%
EPS (Rs)                               0.07      0.10
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