NBP’s consolidated earnings grow 10% over the year

Growth comes on back of lower provisioning expenses, higher dividends from associates.

KARACHI:

National Bank of Pakistan (NBP) has posted its financial results for the first nine months of the current calendar year (9MCY12).

On a consolidated basis, NBP’s earnings for the period have grown 10% year-on-year (YoY) to Rs12.72 billion, from Rs11.52 billion in 9MCY11. According to Raza Jafri, head of research at AKD Securities, the profit announcement has missed expectations due to lower-than-projected net interest income (NII) because of higher interest expenses incurred by the bank.

Standout facts from the consolidated results include a 6% YoY decline in NII due to lower interest rates and enhanced floor rate for savings accounts. Other significant numbers include 13% YoY increase in non-interest expenses; a 32% YoY decline in total provisions driven by reversals in provision for diminution in the value of investments and lower loan loss provisions; and 27% YoY driven by robust dividends, foreign exchange earnings, capital gain income and share of profits from associates, according to Umer Pervez, head of research at Shajar Capital.

“Last year where the bank incurred nearly Rs7.2 billion in provisioning expenses, this time provisioning reduced to Rs4.9 billion thanks to aggressive provisioning of the banks in last few quarters and restricted lending,” said Topline Securities analyst Farhan Mahmood. “Further, more than a 2.5 times increase in dividend income amid better payouts owing to resilient corporate earnings also supported the bank’s bottom-line,” he added.

On a quarterly basis, NBP has posted a net profit of Rs3.43 billion for the third quarter of the current calendar year (3QCY12). The figure is flat on a YoY basis, but has plummeted nearly 22% over the previous quarter. The sharp decline came on the back of a 10% reduction in NII and lower capital gains and other income; even as the bank recorded 170% growth in foreign exchange income and recorded impairment reversals during the quarter.

Unconsolidated results

On standalone basis, however, NBP’s earnings have grown by only 4% over the previous year. Net interest income (NII) reduced by 7% YoY to Rs31bn amid decline in interest rates, but significant decline in provisions and higher dividend income offset the impact on bottom-line, said Mahmood.

“During the third quarter of 2012, the bank posted earnings up 9% YoY mainly due to higher non-interest income, which more than compensated for the decline in NII,” he said.

The bank’s interest income (not NII) grew by 8% YoY on account of higher earnings assets, explained Farhan Malik, analyst at Summit Capital, but a massive increase in interest expense of 22% owing to higher deposits and cost on the same eroded this gain.

Published in The Express Tribune, October 25^th, 2012.