NBP reports dismal earnings amid low-interest environment
Profits down 30% in first half of 2013 as higher provisioning eats up income.
NBP's net interest income witnessed a drop of 4.7% due to decline in the discount rate and escalating interest expensed upon the savings rate paid on average balance. PHOTO: FILE
KARACHI:
National Bank of Pakistan (NBP) has suffered a hit to its profits in the first half of 2013 - amid the low-interest rate environment - reporting consolidated earnings of Rs6.92 billion, a fall of 30% compared to what it earned in the corresponding period a year ago.
Continuously shrinking net interest margins as the central bank pursued an expansionary monetary policy during the period ie slashing interest rates amid falling inflation, and abnormally high provisioning expense has reversed the fortunes of the bank which reported stellar earnings in 2012.
According to a notice sent by the bank to the Karachi Stock Exchange, core income of the bank – net interest income – witnessed a drop of 4.7% due to decline in the discount rate and escalating interest expensed upon the savings rate paid on average balance.
Total provisions were reported at more than double, 122% to be exact, over the previous corresponding period at Rs7.4 billion, with provisioning against bad loans contributing the highest as it grew by 2.5 times to Rs6.53 billion, compared to Rs2.57 billion in the first half of 2012.
Resultantly, net income from core operations of the bank were reported 28% lower at Rs13.09 billion.
Non-core income (earnings from fees, dividends and investments) was the silver lining for the bank as it witnessed growth. NBP recorded 20% higher non-interest income of Rs14.1 billion, owing to a booming stock market as it made Rs2.78 billion by trading securities, and hefty profits earned from joint ventures. Share of profit from joint ventures was 20 times higher at Rs383 million.
After talking to the bank’s management, Elixir Securities reported that NBP’s non-interest income remains trivial going forward as the bank does not plan to expand.
On the contrary, NBP was planning to re-launch Islamic banking under the product name ‘Aitmaad’ by the end of third quarter of 2013 by aggressively adding Islamic branches to its nationwide branch network. The bank is targeting to add 100 Islamic branches in 2013.
Published in The Express Tribune, August 23rd 2013.
National Bank of Pakistan (NBP) has suffered a hit to its profits in the first half of 2013 - amid the low-interest rate environment - reporting consolidated earnings of Rs6.92 billion, a fall of 30% compared to what it earned in the corresponding period a year ago.
Continuously shrinking net interest margins as the central bank pursued an expansionary monetary policy during the period ie slashing interest rates amid falling inflation, and abnormally high provisioning expense has reversed the fortunes of the bank which reported stellar earnings in 2012.
According to a notice sent by the bank to the Karachi Stock Exchange, core income of the bank – net interest income – witnessed a drop of 4.7% due to decline in the discount rate and escalating interest expensed upon the savings rate paid on average balance.
Total provisions were reported at more than double, 122% to be exact, over the previous corresponding period at Rs7.4 billion, with provisioning against bad loans contributing the highest as it grew by 2.5 times to Rs6.53 billion, compared to Rs2.57 billion in the first half of 2012.
Resultantly, net income from core operations of the bank were reported 28% lower at Rs13.09 billion.
Non-core income (earnings from fees, dividends and investments) was the silver lining for the bank as it witnessed growth. NBP recorded 20% higher non-interest income of Rs14.1 billion, owing to a booming stock market as it made Rs2.78 billion by trading securities, and hefty profits earned from joint ventures. Share of profit from joint ventures was 20 times higher at Rs383 million.
After talking to the bank’s management, Elixir Securities reported that NBP’s non-interest income remains trivial going forward as the bank does not plan to expand.
On the contrary, NBP was planning to re-launch Islamic banking under the product name ‘Aitmaad’ by the end of third quarter of 2013 by aggressively adding Islamic branches to its nationwide branch network. The bank is targeting to add 100 Islamic branches in 2013.
Published in The Express Tribune, August 23rd 2013.