Corporate results : Banking sector profits grow 20%

Tightening of discount rate by SBP in 2010, and unchanged during 2011, pushed average Kibor up by 140 basis points.


Express September 19, 2011

KARACHI:


The banking sector’s profit rose by 20% to Rs47.4 billion in the first half of 2011, standing slightly lower than big five banks’ growth of 24%.


The industry’s growth was driven by higher net interest income and non-interest income, according to a JS Global Capital research note.

Among top and mid-tier banks, MCB Bank, Habib Bank, Allied Bank and Bank Alfalah recorded impressive double-digit growth of 26%, 19%, 17% and 76%, respectively.

JS Global Capital in its review analysed 19 out of 24 banks listed on the Karachi bourse, accounting for 99% of the banking sector’s share.

Net interest income grew by an impressive 20% to Rs151.4 billion due to higher Kibor and growth in earning assets, particularly investments. Investments for the entire sector grew by 20% which supported the growth in net interest income.

The tightening of discount rate by the State Bank of Pakistan in the second half of 2010 and keeping it unchanged during the following quarter, pushed average Kibor up by 140 basis points to 13.73% during the period under review.

Non-funded income was 17% higher at Rs48 billion on a yearly basis due to a rise in fee income. Fee income rose by a cumulative 9% to Rs22.4 billion due to increased commissions from remittances and trade business.

MCB Bank’s fee income led the growth among big five banks, rising 18% while HBL’s non-funded income declined by a single percentage point to Rs2.5 billion.

Loan losses grew by a significant 24% to Rs27.6 billion due to new non-performing loan (NPLs) accretion and downward shift in older NPLs. Of the top five, Allied Bank was the exception as its loan losses actually declined by 42% while the rest reported a growth between 18% and 61%.

Moreover, administrative expenses rose by 17% to Rs92.6 billion due to inflationary pressures which continued to put pressure on profitability.

Published in The Express Tribune, September 20th,  2011.

COMMENTS (1)

Sohail | 12 years ago | Reply In a country like Pakistan non performing loans are increasing very rapidly due to the current situation of the country and poor credit policy by the banks.
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