NBP profit swells by 83 percent

The profit of the National Bank of Pakistan (NBP) recorded a tremendous growth of 83 percent in the six months ended June 30, 2006. The National Bank announced financial results for the first half of 2006.
It posted an EPS of Rs 11.31. In the first-half 2006, the PAT of the bank surged to Rs 8,016 million against Rs 4,394 million posted in the corresponding period last year, depicting an increase of 82.4 percent YoY.
In the 2Q''06 alone, the bank posted a PAT of Rs 4,404 million (EPS: Rs 6.21) as against Rs 2,509 million (EPS: Rs 3.54) reported in the same period last year, showing an increase of 75.5percent YoY.
The National Bank did not announce any cash dividend or bonus issue for shareholders. The growth in profitability is on the base of strong growth in the core mark-up/interest income. The net mark-up/interest income of the bank surged to Rs 14,373 million from Rs 9,873 million reported in the corresponding period last year, showing an increase of 45.6 percent.
Non mark-up income of the bank for the period under review was Rs 4,890 million as against Rs 3,708 million reported in the comparable period last year, depicting an increase of almost 32 percent.
Net mark-up income as percentage of total revenue surged by 190 bps from 72.7 percent in 1st HY05 to 74.6 percent in 1st HY06, indicating the healthy mark-up spread which as per our estimates rose to 725 bps-750 bps during the half year from 650 bps recorded in the entire FY05.
Non mark-up expenses, which comprise mainly administrative expense, recorded only a marginal increase of 9.5 percent. Provisioning against advances and investments recorded a minimal decline of 0.2 percent. Thus the controls on the ''expense side'' also continued towards the healthy growth in profitability.
An analyst from Noman Abid & Co, said overall the bottom line of the NBP recorded an increase of 82.4 percent, surging to Rs 8,016 million (ESP: Rs 11.31) from Rs 4,394 million (EPS: Rs 6.20), reported in the same period last year. The reported PAT was only 0.79 percent lower than our estimated PAT of Rs 8,081 million (EPS: Rs 11.40).
Besides the rise in mark-up spreads, the other reasons behind the very significant jump in the bottom line include the following: decline of 0.2 percent in provisioning (for doubtful debts), disproportionately lower increase in administrative expenses, 338 basis points decline in effective tax rate. The effective tax rate declined to 34.7 percent from 37.7 percent in first half 2005.