At a time when there are fears of US recession and banking stocks remained under pressure, large private banks in Pakistan have posted above average growth of 27 percent in 2011, analysts said. The cumulative earnings of these four banks reached Rs 66 billion in 2011, up 27 percent from 2010, Farhan Mahmood, senior analyst at Topline Securities said.
"Our analysis is based on large four private banks (based on bank deposits and branches) including HBL, UBL, MCB and ABL which contribute more than 50 percent share of the listed private banks' deposits and represent approximately 60 percent of the total branch network," he said. Amongst listed private banks, these four banks contribute 70 percent of the market capitalisation.
He said the bank wise profitability shows that UBL posted highest profitability growth of 39 percent, followed by HBL 33 percent, ABL 23 percent and MCB 15 percent. "Thanks to higher return on advances and better yield on government papers, overall net interest income (NII) of these four big banks grew by 17 percent," he said adding that this shows impressive core banking operations as average 6-months KIBOR increased by 70bps in 2011 compared to 2010 while cost of funds remained on the lower side.
Similarly, with overall improvement in trade activities, better opportunities in forex and money market, non-interest income of these big banks grew by impressive 21 percent. Moreover, restrictive lending resulted into lower provisioning in 2011 which stood at Rs 21.5 billion, down 10 percent. "Though we expect earnings growth to slightly cool down in 2012 amid decline in interest rate, however, gradual recovery in economy and infrastructure spending could create appetite for credit and will impact positively on banks with lower ADR," he said. Moreover, with decline in interest rate there is high probability that NPL accretion to slowdown in 2012, which could limit overall provisioning, he added.
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