KARACHI: Profits of key companies listed on PSX have remained fabulous despite the economic issues faced by Pakistan.

In the calendar year 2023, 83 companies (88 percent of market capitalization) of KSE-100 index posted after tax profit of Rs1.66trillion showing an amazing growth of 45 percent over 2022.

In USD terms, the profits of these companies were $5.94billion up 6.3 percent in 2023.

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Banks contributed 34 percent in total profits in 2023. Excluding banks, total earnings were up 31 percent (minus 3.8 percent in US$ terms).

Similarly Oil and Gas Exploration (E&Ps) firms make 29 percent of total profits in 2023. Excluding E&Ps, earnings increased by 40 percent in 2023 (up 2.5 percent in US$ term).

Excluding these two big sectors, profit grew 15 percent (minus 15.5 percent in USD term) in 2023.

Many people are curious to know how profits posted such a massive improvement when the economy is not showing big signs of improvement. Most people look at real GDP growth to analyse economic health. Pakistan real GDP declined 0.4 percent in 2023 based on figures of three quarters (March, June, and September). However, nominal GDP grew approximately 25 percent in 2023.

“Corporate earnings usually follow nominal GDP growth trend as inflation is being passed onto the consumers where possible”, an analyst at Topline Securities said. Moreover, the two heavy weight sectors (Banks and E&P) profits are not directly linked to overall economy

“Banks in fact make more money when interest rates are high and when deposit growth is better led by higher money supply. Similarly, exploration firms earn more with rising global oil prices and falling PKR against US dollar.”

Copyright Business Recorder, 2024