NBP profits flat YoY, beat analyst expectations

KARACHI: NBP posts a flat profit after tax, up 0.024 per cent this quarter as compared to the same period last quarter.

They beat analyst expectations by posting a profit after tax of Rs4.215 billion, Rs205 million more than BMA Capital analysts expected. The net interest income after provisions went up 4.2 per cent this quarter as compared to the same period last quarter. This was mainly because of a 4.5 per cent surge in the net interest that the bank earned which was balanced by a 22.8 per cent increase in provisions against non-performing loans.

This is despite a change in regulations by the State Bank of Pakistan, which lowered the amount that banks have to set aside as provisions against non-performing loans. This change has helped nearly every bank increase its profit margins. The central bank had raised the “forced sale value” of collateral that a bank can use to determine the amount of a loan that needs to be written off from 30 per cent to 40 per cent and also changed some of the items that can be included as part of the collateral’s value.

In essence, it raised the value of non-performing loans that banks could keep on their balance sheets, thus reducing the amount needed to be written off. The NBP is a government bank, its loan exposure is more varied than other banks and politics are involved, said InvestCap Securities analyst, Khurram Shehzad. This and the bank’s possible loans to the Dewan Mushtaq Group are the possible causes for its increase in provisioning, he said There has been a slowdown in loan growth and NPLs have continued to surge, said BMA Capital Analyst, Abdul Shakur.

Net interest income is expected to increase due to improving current accounts and savings account with downward sticky interest yields, he said “Being relatively liquid, NBP is expected to remain selective for deposit growth which is expected to help reduce annualized cost of funds and contrary to the industry norms the NBP is expected to continue writing loans along with higher exposure to government papers due to persistent government borrowing requirement,” said Shakur.