Bank Islami bounces back, posts Rs125.4m profit

Earnings were up 76% in Q1 compared to 1QCY15

KARACHI: After posting a net loss of over Rs196 million in 2015, Bank Islami has returned to profit in the first quarter of 2016.

The second largest Islamic bank reported on Monday it earned a net profit of Rs125.4 million for Jan-Mar, up almost 76% from the earnings recorded in the comparable quarter of 2015.

Bank Islami’s net spread earned, which is the difference between profit earned and return on deposits, shrank 6.3% on a year-on-year (YoY) basis to Rs832.5 million for Jan-Mar. However, substantial reversals in provisions against non-performing Islamic financing and related assets and advances resulted in a spike in the net spread after revisions for the quarter.



Reversals amounting to Rs500.7 million helped the post-provisions net spread of Bank Islami grow 56.8% year on year to Rs1.3 billion for the Jan-Mar quarter.

Administrative expenses of Bank Islami recorded a jump of 59.5% on an annual basis to reach Rs1.4 billion at the end of the first quarter of 2016.



Bank Islami is gradually coming out of the crisis mode that it entered upon acquiring KASB Bank in May 2015. KASB Bank was in loss and did not meet capital adequacy requirements at the time of its acquisition by Bank Islami.

KASB Bank’s liabilities exceeded its assets at the time of its acquisition by more than Rs5.7 billion. Bank Islami received the fair value benefit of subsidised financing from the SBP for liquidity support amounting to Rs2.9 billion. Therefore, the excess of purchase consideration for Bank Islami amounted to Rs2.8 billion.

The bank is now in the process of converting the conventional portfolio of the defunct KASB Bank into Shariah-compliant products and aims to complete it “within a reasonable period of time.”

Net assets of Bank Islami amounted to Rs11.5 billion at the end of March, up 3.1% from December 2015. Its net investments rose more than 100% to Rs71.9 billion on a quarterly basis while deposits and other accounts declined 5.6% to Rs144.4 billion over the same three-month period.

The stock of Bank Islami lost 3.3% to close at Rs11.50 per share with 6,000 shares changing hands on Monday.

Published in The Express Tribune, July 26^th, 2016.

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