Standard Chartered profit rises a whopping 86%

Earnings surge following a marked decrease in bad loans.

KARACHI:

After-tax profit of Standard Chartered Bank Pakistan increased 86.5% to Rs4.6 billion in the first half of 2013 compared to earnings in the corresponding six-month period of 2012, according to the financial results the bank sent to the Karachi Stock Exchange (KSE) on Thursday.

Income statement for January-June 2013 shows that the massive rise in the bank’s profit is due to reversal of non-performing loans and advances, which amounted to Rs920.4 million as opposed to the provisions of Rs1.8 billion that the bank made in the first half of 2012.

As a result, net interest income after provisions increased to Rs10 billion in the six-month period, up 30.7% compared to January-June 2012.

This comes despite the fact that net interest income before provisions recorded a decline of 2.4% to Rs9.3 billion over the same period.

The bank’s earnings per share in January-June 2013 remained at Rs1.21 versus Rs0.65 in the first half of 2012. It also declared an interim cash dividend of Re1 per share.

“These results demonstrate the diversity and resilience of our business,” Standard Chartered Bank Pakistan CEO Mohsin Nathani said in a statement, adding the bank would continue its prudent approach towards building its balance sheet.

Saying that the reduction of 300 basis points in the discount rate since January 2012 has significantly affected the revenue base of the bank, he added the bank had maintained its top line by increasing business volumes and improving margins.

“Costs have been managed despite investment into franchise and ongoing inflation, while dedicated efforts for recoveries have resulted in net releases in loan impairments,” the statement said.

Indeed, administrative expenses decreased 12% to Rs6 billion in the first half of 2013 compared to January-June 2012 when they amounted to Rs6.9 billion.

Other than reversal of non-performing loans and a decrease in administrative expenses, gains on sale of securities also helped the bank’s bottom line grow. While it gained Rs285 million by selling securities in the first six months of 2012, the figure increased to Rs578.6 million in January-June 2013, translating into a year-on-year increase of almost 103%.

The stock price of Standard Chartered Bank Pakistan increased 5.7% to Rs18.5 per share at the end of Thursday’s trading session on the Karachi bourse.

While the stock of Standard Chartered is fairly illiquid, it recorded unusual turnover on Thursday with volumes reaching 435,500 shares, the third highest volume recorded in a day during the last three months.

Published in The Express Tribune, August 30^th, 2013.

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