Commercial Banks: THE BANK OF PUNJAB - Year Ended December 31, 2005 (Audited)

The Bank of Punjab (Punjab Bank) was constituted pursuant to the Bank of Punjab Act, 1989 and was given the status of a scheduled bank by the State Bank of Pakistan on September 19, 1994. Punjab Bank is principally engaged in commercial banking and related services through its 266 branches (2004: 253 branches) concentrated mostly in the Punjab.
However, the bank has five branches in Karachi/Quetta area and six branches in Peshawar area. All branches of the bank are now interlinked on real time basis. It is listed on Lahore, Karachi and Islamabad Stock Exchanges. Punjab Modaraba Services (Private) Limited is a fully owned subsidiary of the bank and is profitably managing a Modaraba company. The present Overview is, however, that of the bank alone, without consolidation with its subsidiary.
Pacra, the public sector credit rating agency, has awarded Punjab Bank with the credit rating of AA- (Double A Minus) for long term and A1+ (A One Plus) for short term. As on December 31, 2005, Punjab Bank had total 3,430 employees (2004: 3,144 employees). As agriculture is the backbone of economy, Punjab Bank has given priority to its development and growth.
A large number of schemes have been introduced to provide financial support to the farmers in all sub sectors of agriculture. The SMEs and Consumer Finance are other areas of special interest to the bank, which established a separate Division to cater the specialised requirements.
The authorised capital of Punjab Bank is Rs 10 billion, comprising one billion shares of Rs 10 each. As on December 31, 2005 the paid up capital was Rs 2.350 billion, held by 10,080 shareholders, of which 9,664 individuals hold nearly 20% shares. Holding of the Government of the Punjab is nearly 52% of the total. The rest of the shares are distributed among a large number of corporate entities including banks and DFIs.
With the approval of final proposed 22 % stock dividend, the paid up capital will increase to Rs 2.867 billion. The bank expects to be able to meet Rs 6 billion paid up capital requirement well before the SBP specified period.
Total assets of Punjab Bank increased by 68% to Rs 111 billion on December 31, 2005 compared to Rs 66 billion on December 31, 2004. With that, Punjab Bank has joined the 100 billion banks club.
Increase in assets has been largely financed through 62% increase in Deposits to Rs 88 billion (80% of Total Assets) as on December 31, 2005 (2004: Rs 55 billion). Emphasis is reportedly being placed on enhancing depositors' base and attracting core deposits minimising over reliance of institutional and public sector deposits.
As on December 31, 2005 Investments increased by 11% to Rs 18 billion (16% of TA) compared to Rs 16 billion (24% of TA) as on December 31, 2004. The Investments include rather high Surplus on Revaluation of Investments at Rs 5.97 billion (2004: Rs 3.4 billion).
Punjab Bank's Advances as on December 31, 2005 were Rs 63.6 billion (57% of Total Assets), registering 61% increase over previous year Advances at Rs 39.4 billion (59% of TA). On December 31, 2005, 100 % Advances are in local currency, while 72% of the total Advances are for short term. Major exposure of the bank by way of Advances is in Textiles & Ginning (25.55%), Trading & consumers (14.05%), Real Estate / Construction (10.25%), Food (4.84%), Agriculture (7.58%), Individuals (4.68%), Cement (3.25%), Sugar (2.95%), Electronics (2.96%), and Services (4.17%).
Punjab Bank's equity as on December 31, 2005 stands at Rs 6.777 billion (6% of Total Assets) whereas gross NPLs on this date are Rs 1.360 billion (2.1% of Gross Advances). Besides, there is Surplus on Revaluation of Assets of Rs 6.893 billion, thus raising equity stake to Rs 13.67 billion (12% of TA). There are no Subordinated Loans. Moreover, it may be noted that Punjab Bank has made full provision (Rs 0.733 billion) against Gross NPLs according to the SBP criteria applicable. Apart from that, Punjab Bank has, on December 31, 2005, made general provision (Rs 97 million).
Very low level of NPLs as shown above could be the result of Punjab Bank's prudent strategy to lend to the right type of customers. Despite huge growth in Advances reportedly no compromises were made on quality of the borrowers / loan at the loan approving stage or subsequent monitoring. However, as some doubtful loans have the tendency to stay under cover for sometime due to different reasons, a prudent policy for Punjab Bank would be that the management remains extra vigilant in the appraisal and monitoring of all loans, especially the consumer loans.
Punjab Bank achieved record 72% increase in its profit after tax for the year ended December 31, 2005 to Rs 2.353 billion as compared to Rs 1.368 billion for the last year. ROE at 34.7% for the year is attractive compared to the last year performance (2004: 31%). Punjab Bank shares are currently traded at the stock exchanges at prices, over three times of the Book Value as on December 31, 2005. Performance statistics are given below.

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Performance Statistics                     (Million Rupees)

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Balance Sheet                    (Audited)     (Rs million)

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As on December 31,                   2005              2004

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Total Assets:                     111,154            66,320

Cash, balances with banks:         18,155             7,698

Lending to financial institutions:  7,593             1,019

Investments-Net:                   18,026            16,198

Advances-Net:                      63,624            39,439

Borrowing from fin. Institutions:   6,791             2,832

Deposits, other accounts:          88,465            54,724

Total Liabilities:                 97,484            58,481

Net Assets:                        13,670             7,839

Share Capital:                      2,350             1,506

Reserves, Un-app. Profit:           4,427             2,914

Total Equity:                       6,777             4,420

Surplus on Revalue, Assets:         6,893             3,419

Equity incl. Revalue Surplus:      13,670             7,839

Subordinated Loan:                      0                 0

Equity and Sub. Loans:             13,670             7,839

Advances-Gross:                    64,454            39,955

Gross NPLs:                         1,360             1,166

Total Provision:                      830               516

Conting. & Commitments:            21,040             7,716

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Ratios:

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Cash and bank/Total Assets:            16%              12%

Investments/Total Assets:              16%              24%

Advance-Net/Total Assets:              57%              59%

Gross NPLs/Advances-Gross:            2.1%             2.9%

NPLs/Total Equity:                     20%              26%

NPLs Prov./Advances-Gross:            1.3%             1.3%

Deposits/Total Assets:                 80%              83%

Total Liabilities/Total Assets:        88%              88%

Total Equity/Total Assets:           12.3%            11.8%

Equity & S.Loans/Total Assets:       12.3%            11.8%

Deposits/Equity-Times:               13.1              12.4

Advances/Deposits:                     72%              72%

Investments/Deposits:                  20%              30%

Contin.& Comm./Equity-Times:         3.10              1.75

Book Value Per Share:               28.84             29.35

Quoted Price (4-04-06) - Rs:        93.50                 -

Price/Book Value Ratio:              3.24                 -

Income Statement                     2005              2004

Markup-interest earned:             6,125             2,555

Markup-interest expensed:           2,669               719

Net Markup-interest income:         3,456             1,836

Provisions and write offs:            331                47

Net mark up after provisions:       3,125             1,789

Total non-markup income:            1,331             1,097

Total Income before Admn. Exp.:     4,456             2,886

Admin Expenses, etc:                1,291             1,150

Profit before Taxation:             3,165             1,736

Current & deferred tax:               812               368

Profit after taxation:              2,353             1,368

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Ratios: (Annual Basis)

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Markup earned/Total Assets:           5.5%             3.9%

Net Markup Income/T. Assets:          3.1%             2.8%

Net markup income (Prov.)/TA:         2.8%             2.7%

Non-Markup Income/TA:                 1.2%             1.7%

Total Income before AE/TA:            4.0%             4.4%

Admin Expenses/TA:                    1.2%             1.7%

Profit before Taxation/TA:            2.8%             2.6%

Profit after taxation/TA:             2.1%             2.1%

Profit after tax/Total Equity:       34.7%            31.0%

EPS-(year-end paid up) - Rs:        10.01              9.08

Price/Earnings Ratio:                9.34                 -

Cash Dividend:                          0%               0%

Bonus Shares:                          52%              40%

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Cash flow Summary                    2005              2004

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Net Cash flow, Operations:          9,114             2,919

Net Cash flow, Investing:           1,343            -3,187

Net Cash flow, financing:               0                 0

Change in Net Liquidity:           10,457              -268

Net Liquidity at beginning:         7,698             7,966

Net Liquidity at end:              18,155             7,698

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