Save for the one-off executive reimbursement related administrative expenses, Standard Chartered Bank (Pakistan) Limited (SCB) has just finished a commendable 2014. The bank boasts of profitability, adequacy and coverage ratios that would make most other local banks envious. Yes, the after tax profits slid year-on-year, but that owes largely to a one-off event of executive reimbursement administrative expenses.
The top line grew at a healthy pace, primarily on the back of investments in government securities. Parking deposits in government securities and shifting the investment portfolio to the more lucrative PIBs was the order of the day in CY14 and SCB did not shy away from the opportunity on offer. Banks are best analyzed with balance sheet numbers, which are yet to arrive.
But a look at 9MCY14 numbers tells, SCB like most others increased exposure in government papers with an IDR of nearly 56 percent. The deposit growth remained largely muted throughout the year as SCB is one bank that focuses more on the quality of deposit mix than just adding on meaningless deposits. SCBs CASA ratio at 92 percent is one of the highest in the industry, which keeps the cost of deposits well in check, even in testing times such as these.
Prudence is what SCB prides itself on and the coverage ratio in excess of 90 percent speaks volumes of the drive to keep the book clean.
That said the NPLs, although coming down, are still higher than the industry average and SCB would do well to cut them further.
The ever present non-mark-up income provided further impetus as dealing in foreign currencies, fee, commission and income from Sri Lankan operations all combined to fatten the bottom line. SCBs strong focus on cash management operations seems to be yielding good results too.
SCBs Islamic banking operations have also received excellent response in the market and Islamic operations now account for almost one-fifth of the after tax profits and financing.
From here on, with tighter spreads and lower interest rates, market will present an opportunity to lend more to the private sector. SCB has enough leverage to do that with relatively better numbers, but will it actually do that is best left to the bank management. Profit making from over reliance on PIBs may have been successful in CY14, but CY15 surely demands a shift in strategy.
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Standard Chartered Bank (Pakistan) Limited
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Rs (mn) CY14 CY13 chg
Markup Earned 35,269 31,493 12%
Markup Expensed 13,873 12,687 9%
Net Markup Income 21,396 18,806 14%
Provisioning/(Reversal) 483 -925
Net Markup Income after provisions 20,912 19,731 6%
Non Mark-up/Interest Income 7,400 5,881 26%
Operating Revenues 28,312 25,612 11%
Non Mark-up/Interest Expenses 12,944 9,244 40%
Profit Before Taxation 15,368 16,368 -6%
Taxation 5,553 5,669 -2%
Profit After Taxation 9,815 10,699 -8%
EPS (Rs) 2.49 2.73
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Source: KSE Notice
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