Banking sector: Big five profits surge 24%

National Bank profits hit by huge provisioning.

Express August 22, 2011

KARACHI: The big five banks have posted above average growth of 24% in the first six month of 2011 to reach Rs40 billion.

The big five banks based on bank deposits and branches include National Bank of Pakistan, Habib Bank, United Bank , MCB Bank and Allied Bank which contribute more than 57% share of the total banking sector deposits and represent approximately 80% of the market capitalisation, according to a Topline Securities research note. National Bank of Pakistan was the laggard from the lot as it incurred huge provisioning during the period under review, adds the note.

Overall net interest income of the banks grew by 17% on the back of higher return on advances and better yield on government papers.

This shows impressive core banking operations as average six-month Kibor increased by 1.54 percentage points during January to June 2011. Moreover, large banks continued to opt for a risk averse approach by parking their funds into less risky government securities, adds the note.

Similarly, with overall improvement in trade activities, non-interest income of big banks grew by impressive 22%. However, provisioning remained on the higher side and rose 20% to Rs19 billion.

Impressive earnings are expected to continue as the banking sector is expected to post earnings growth of 23% in 2011. The ongoing recession fear may not impact local banks as they have very little exposure to global bonds and stocks, says the note.

Published in The Express Tribune, August 23rd,  2011.

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