Major banks' first quarter earnings up 24 percent

The earnings of key listed commercial banks has increased 24 percent to reach at Rs 18.3 billion in the first quarter of 2007 as compared to Rs 14.8 billion in the corresponding period last year. Analysts said this positive profitability growth momentum, if continues throughout 2007, would make 2007 the sixth consecutive year of profitability growth in the Pakistani banking sector.
During the first quarter, earnings growth in banks was mainly driven by rising net interest income of the banks which from Rs 28 billion in the first quarter 2006 rose by an impressive 31 percent to Rs 36.7 billion in the first quarter of 2007.
Atif Malik, an analyst at JS Research said that net interest income grew mainly on the back of higher spreads between lending and deposits rates. As per SBP data, banking sector average spread in first two months (january-February) of 2007 went up by 20bps to 7.47 percent from an average 7.27 percent in the same period in 2006.
Similarly, non-interest income of the banking sector also depicted decent growth of 16 percent to Rs 11.5 billion. In which, major contribution came from fee income (43 percent share in the total non-interest income) that grew by 5 percent to Rs 5.0 billion.
Dividend income and capital gain, however, declined by 53 percent and 31 percent to Rs 0.4 billion and Rs 1.0 billion, respectively. Moreover, administrative expenses rose by 34 percent to Rs 19.1 billion in the three month period in 2007 versus Rs 14.3 billion in the first quarter of 2006.
Amongst 24 listed banks in Pakistan, 19 banks are taken of this analysis as the remaining five banks are left out primarily due to the unavailability of their comparable results or these banks are yet to announce their results. As of December 2006, these 19 banks represent 78.3 percent and 77.7 percent of the total banking sector's deposits and assets.
The earnings of the sample banks grew as NBP's earnings grew by 20 percent, MCB Bank 24 percent, UBL 36 percent, SCB Pakistan 12 percent, Allied Bank 25 percent, Bank of Punjab 33 percent, Askari Bank 75 percent, Faysal Bank 40 percent, Bank Al Falah 71 percent, Habib Metropolitan Bank 87 percent, Bank Al Habib 1 percent, Soneri Bank 6 percent, PICIC Commercial Bank -50 percent.
MyBank 13 percent, Bank of Khyber -53 percent while earning growth of KASB Bank was -50 percent in this period. "We expect banks' earnings growth momentum to continue and for 2007 full year we forecast banks' earnings to grow by 20 percent to 25 percent", Atif Malik added. ENDS.