NBP’s profit for 2012 clocked in at Rs16.89 billion, down 5% from previous year’s profit of Rs17.73 billion.
Despite tighter banking spreads throughout 2012, the National Bank of Pakistan (NBP) managed to report stellar profits on Monday pushing the company’s stock price to highest in two years.
On a consolidated basis, NBP’s profit for 2012 clocked in at Rs16.89 billion, down 5% from previous year’s profit of Rs17.73 billion, according to a notice sent to the Karachi Stock Exchange. The bank also announced a final cash payout of Rs7 per share as well as a surprise 15% bonus share issue.
The bonus issue came as a surprise because the company had enough existing paid-up capital, standing at Rs18.5 billion, versus a minimum capital requirement of Rs10 billion for the banking industry.
During Monday’s trading session at the Karachi Stock Exchange, the bank’s share prices gained Rs1.35 to close at Rs54.74 – the highest in two years.
Following a 250 basis points decline in interest rates in the last six months of 2012 and a 100 basis points increase in minimum rate on saving deposits, resulting in a hefty decline in average banking spreads by 61 basis points in the year, NBP’s net interest income declined 6% to Rs44.57 billion. (A hundred basis points equal one per cent.)
NBP’s asset quality has witnessed improvement despite growth of 15% in provisioning towards non-performing loans during the year. The increase in provisioning expenses towards liabilities was offset by a considerable drop in provisioning for investments from Rs3 billion last year to just Rs0.864 billion, resulting in a 14% decrease in total provisioning expenses to Rs8 billion.
Moreover, NBP’s posted a strong growth of 26% in non-interest income driven primarily by fee, dividend and capital gains to Rs24.8 billion in 2012. Fee, commission and brokerage income stood at Rs11.12 billion, dividend income showed growth of 31% to Rs2.08 billion, income from dealing in foreign currencies grew to Rs3.8 billion. Additionally, gain on sale and redemption of securities grew 35% and NBP’s share of profits from associates jumped twentyfold to Rs1.855 billion. However, the 19% increase in non-interest expenses to Rs24.1 billion diluted the effect of growth in NBP’s non-core earnings and the bottom-line in general.
That being said, NBP held Rs20.4 billion as unrealised gains as of September 30, 2012, out of which Rs5 billion unrealised gains pertained to quoted shares/mutual funds while Rs3 billion pertained to Federal Government securities, according to Shajar Capital.
Published in The Express Tribune, February 26th, 2013.
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