Incorporated in March 2003, NIB started its operation as NDLC-IFIC Bank. Having an asset base of around Rs 171 billion as of 30th September 2011, NIB Bank Ltd is the country's thirteenth largest commercial bank and eighth largest mid-sized bank. The Bank is currently operating through a network of 179 branches with key focus on four business units: Corporate and investment banking; SME and commercial banking; retail banking and treasury.
Mark-up revenues NIB's top-line registered a year-on-year decline of 19 percent during the first nine months of CY11. This is down to decline in advances portfolio. The Bank's asset base improved by 4 percent during the first nine months of CY11 up to Rs 171 billion as of 30th September 2011.
The asset base increased on account of expansion in the Bank's investment base, which grew by a whopping 25 percent during the first nine months of CY11 to Rs 65 billion at the end of September 2011 leading to jump in the Bank's Investment to deposit ratio by 22 percentage points to 75 percent. At the same time, the Bank's advances base suffered, fell by 18 percent during the period under review to Rs 61 billion at the end of September 2011: While the Bank's advances to deposit ratio eased down by 5 percentage points to 70 percent.
Mark-up expenses On account of decline in the deposit base, the Bank's mark-up expenses fell by 14 percent, year on year, to Rs 8.9 billion during the first nine months of CY11. The Bank's deposit base eased down by 12 percent during the first nine months of CY11 to Rs 87 billion at the end of September 2011. At the same time, the industry deposit base rose by 6 percent to Rs 5,404 billion. Following order of the day to reduce cost of deposits the Bank's fixed deposit portfolio fell by 19 percent during the period under review. This lifted the Bank's CASA ratio by 6 percentage points to 59 percent at the end of September.
Gross spread ratio Battered by decline in mark-up revenues, the Bank's net interest income fell by 42 percent, year on year, to Rs 1.5 billion during the first nine months of CY11. The Bank's gross spread stood at 14 percent during 9MCY11, down by 5.5 percentage points compared to the same period of last year. The Bank's gross spread ratio is lower compared to other mid-sized banks with the group's average ratio at around 35 percent.
Non mark-up income Aided by improvement in dividend income, along with higher income from brokerage activities and dealing in foreign currencies, NIB's non mark-up income improved by 20 percent, year on year, to Rs 1.6 billion in 9MCY11. Non mark-up income accounted for roughly 52 percent of the total operating income, which is higher compared to average ratio of around 29 percent for the group of ten mid-sized banks.
While the non mark-up expenses dived to Rs 3.6 billion in 9MCY11, marking a year-on-year drop of 23 percent. With the country facing a high inflationary environment, decline in non mark-up expenses suggests that the Bank is aggressively restructuring its operations to reduce cost burden.
Although, the Bank's operating income fell by 20 percent, year on year, lower non mark-up expenses helped the Bank to keep its income to expense ratio closed to the last year's level at around 0.86 during 9MCY11. The Bank direly needs to scale up its operating income, given that income to expense ratio of other mid-sized banks stood as high as 2.42 during 9MCY11.
Non-performing loans The Bank managed to curtail growth in its non-performing loans, which had massively increased during CY10. The toxic loans fell by 4 percent during the first nine months to Rs 33 billion at the end of September 2011. This marks a significant improvement compared to CY10 since the Bank had witnessed 48 percent jump in non-performing loans during CY10.
In spite of decline in non-performing loans, fall in gross advances level lifted the Bank's infection ratio by 5 percentage points to 40 percent at the end of September 2011. Among the group of ten mid-sized banks, NIB is facing the highest infection ratio. The mid-sized banks average infection ratio stood at 15 percent at the end of September 2011.
The Bank's coverage ratio eased down by 2 percentage points during the first nine months of CY11 to 67 percent as of 30th September 2011-a notch below the mid-sized banks' average coverage ratio at around 71 percent.
Net profit The Bank's bottom-line cloaked in a net profit of Rs 196 million during the first nine months of CY11. This marks significant improvement compared to the last year, given that the Bank incurred a loss of Rs 3.6 billion during the 9MCY10. NIB registered negative bottom line in the past three out of six years.
Rating PACRA has maintained the long-term and the short-term entity ratings of NIB at "AA-" and "A1+", respectively. "The ratings reflect NIB's association with Temasek Holdings-owned by Government of Singapore, internationally rated at AAA. On a stand-alone basis, the poor performance of its loan book caused NIB to experience material weakening," according to PACRA.
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NIB Bank
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(Rs mn) 9MCFY11 9MCY10 chg
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Markup Earned 10,418 12,891 -19%
Markup Expensed (8,911) (10,314) -14%
Net Markup Income 1,507 2,577 -42%
Provisioning (882) (3,872) -77%
Net Markup income after provision 625 (1,295) -148%
Other income 1,628 1,354 20%
Operating revenues 3,135 3,931 -20%
Other expenses (3,666) (4,741) -23%
Profit before taxation (1,413) (4,682) -70%
Profit after taxation 196 (3,560) -105%
EPS (Rs) 0.04 (0.88)
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Source: Company Accounts
COURTESY: Economics and Finance Department, Institute of Business Administration, Karachi, prepared this analytical report for Business Recorder.
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