Corporate results: Bank of Punjab more than doubles profits

Reversal of provisions, higher non-core income leave the bank Rs1 billion richer.

KARACHI:

On Friday, the Bank of Punjab announced its earnings, multiplying its profits two and half times as exemptions from provisioning allowed by the State Bank in the wake of crisis and income from non-core operations relieved pressure of the bottom-line.

According to a notice sent to the Karachi Stock Exchange, the bank earned Rs1.004 billion in the first half of 2013 ending June 30, compared to Rs406 million in the corresponding period of last year. The earnings announcement was not accompanied by any payouts, however the notice said the auditors’ without qualifying their opinion have emphasised on relaxation given by the regulator, undertaking and equity injection arrangements by the Government of Punjab. Moreover, all of the Public Sector Development Programme funding the Punjab government will receive will have to go through the Bank of Punjab.



Bank of Punjab’s equity has risen Rs940 million in the six-month period as the government injected money into the bank, while its deposits grew Rs30 billion to Rs296 billion and advances shrunk Rs11 billion to Rs139 billion showing that the bank has been working on growing deposit-base while cutting down lending.

Resultantly, net interest income of the bank, excluding provisions, saw an increase of 11.7% to Rs1.1 billion in the period. Reversals in provisioning expense of the bank to the tune of Rs930 million also boosted the growth in earnings.

The State Bank had allowed the Bank of Punjab to not provision for Rs30 billion in bad loans. That provisioning would cost the bank over Rs27 billion, which would more than wipe out the bank’s total equity of close to Rs13.3 billion on June 30, 2013.

The exemption from provisioning appears to be consistent with the State Bank of Pakistan’s policy of letting time heal all financial wounds. As a response to the 2008 crisis, the central bank allowed all banks to take asset write-downs over four quarters, instead of having to provision for them all at once.



Non-interest income of the bank witnessed an increase of an impressive 91% as higher capital gains due booming stock market and surging other income helped the bank earn Rs2.05 billion in the semi-annual period, while climbing expenses on account of expansion operations absorbed more than the non-core income leaving the company with a net profit after tax of Rs1.004 billion.

Published in The Express Tribune, August 31^st, 2013.

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