Q3CY23: Listed banks’ profitability up 95pc to record Rs163bn YoY

KARACHI: Pakistani listed banks’ profitability increased to record Rs 163 billion up 95 percent on year-on-year basis in the third quarter of 2023.

This was primarily driven by significant jump in Net Interest Income (NII) amid high interest rates, and balance sheet growth. In US$ terms listed banks profit was also up 50 percent YoY to $560 million in the third quarter of 2023.

NII of the sector clocked in at Rs 481 billion in the third quarter of 2023 against Rs 283 billion in the same quarter in 2022 up 70 percent YoY as average policy rates during the third quarter of 2023 remained to 22 percent against 15 percent in the same quarter in 2022.

Interest income was up by 79 percent YoY to Rs 1.6 trillion, whereas interest expense was up by 84 percent YoY to Rs 1.1 trillion.

Non-interest income of the sector was down by 5.0 percent YoY to Rs 79 billion in the third quarter of 2023 mainly due to loss on securities and decline in FX income.

On other hand, non-markup expense was up 30 percent YoY to Rs 229 billion in the third quarter of 2023 due to higher admin expense which is in-line with inflation.

Cost to Income ratio of the sector improved to 41 percent in the third quarter of 2023 against 48 percent in the same quarter in 2022.

Interestingly despite high interest rates, provisioning charge of sector declined by 9.0 percent YoY to Rs 14.7 billion in the third quarter of 2023 mainly due to strong asset quality.

On quarter-on-quarter basis, listed Banks profitability was up 24 percent in Rs and 22 percent in US$.

This strong QoQ jump in earnings is mainly due to absence of higher tax recorded in the second quarter of 2023 amid implementation of 10 percent super tax which was announced in Federal Budget FY24.

Effective tax rate for third quarter of 2023 clocked in at 48 percent against 52 percent in the second quarter of 2023.

In the nine months of 2023, the sector’s earnings were up 102 percent YoY to Rs 421 billion (up 44 percent YoY at $1.5 billion) led by higher NII which was up 69 percent YoY.

Furthermore, lower effective tax rate of 48 percent in the nine months of 2023 against 55 percent in the same period of 2022 also led to higher profit growth.

For analysis, all banks that have announced their financial results have been taken except Silk Bank (SILK), which has not yet announced its results.

Bank-wise, Meezan Bank (MEBL), MCB Bank (MCB), Habib Bank (HBL), United Bank (UBL), and Standard Chartered (SCBPL) posted highest profits of Rs 25.5 billion, Rs19.7 billion, Rs 16.6 billion, Rs 15.0 billion and Rs 12.7 billion, respectively during the third quarter of 2023.

On the other hand, Summit Bank (SMBL) recorded loss of Rs 2.1 billion in the third quarter of 2023.

In terms of NII growth, Bank of Khyber (BOK), Soneri Bank (SNBL), JS Bank (JSBL), Standard Chartered (SCBPL), and BankIslami (BIPL) recorded highest growth of 154 percent, 134 percent, 131 percent, 106 percent and 104 percent respectively in the third quarter of 2023.

In the third quarter of 2023, surprise dividends were seen from a few banks supporting the share prices of listed banks. Moving ahead, a strong dividend payout is expected to continue amid the sector’s robust profitability.

Copyright Business Recorder, 2023