The unconsolidated profit of top five banks has increased by 10 percent to Rs 30.2 billion in the third quarter ended September 30, 2016 as compared to Rs 27.5 billion earned in the corresponding quarter in 2015.
Although there was a decline in both net interest and non-interest income, however reversal in NPL's of the banks and normalisation of effective tax rate (absence of super tax) elevated earnings during the quarter. MCB and HBL were the star performers, as their earnings exhibited an impressive growth of 43 percent and 34 percent respectively.
However, during the nine-month period ended September 30, 2016, the unconsolidated profit of top five banks has reduced by 2 percent on year-on-year basis to Rs 88.4 billion in the first nine months of 2016 as compared to Rs 90.6 billion earned during the corresponding period of 2015.
Analysts said that the major dent to bottom line came from reduced non-interest income. However, nominal increase in net interest income (NII) and steep decline in provisioning expenses restricted earnings from further attrition.
Non-interest income of these five banks decreased by 11 percent to Rs 78.4 billion during nine month period this year as compared to Rs 88.1 billion in the same period in 2015.
This decline is mainly attributable to 30 percent lesser FX income as a result of more stable exchange rate and 25 percent lower capital gains realisation.
The capital gains of top 5 banks stood at Rs 21.2 billion during nine months of CY16 but the quantum was much lower as against the same period of CY15 in which banks recorded sizable capital gains of Rs 28.5 billion. A notable decline was witnessed in the capital gains of HBL and NBP, as they realised Rs 3.3 billion and Rs 6 billion of capital gains during the period under review as against
Rs10.6 billion and Rs 10.2 billion recorded in nine months of CY15.
A much needed support to earnings was provided by net interest income and lower provisioning expense. Despite the decline in average 6M KIBOR by 140bps, NII witnessed a positive growth of 1.3% on account of low cost deposits mobilisation and expansion in interest earning assets.
"During the nine months of CY16, our sample banks cumulatively recorded the provisioning charges of Rs 3.3 billion compared to Rs12.5 billion in the nine months of CY15, down significantly by 74 percent on year-on-year3 basis", analysts said. Chander Kumar at Sherman Securities said this decline was largely on the back of higher provisions which were set aside in the corresponding period last year and loan recoveries amid prevailing low interest rates environment. It is pertinent to note that all the top tier banks have witnessed a decline in their NPL's charges during the period under review.
NBP depicted a massive reduction in provisioning charges of 74 percent by clocking in at Rs 2.1 billion from Rs 8.2 billion in the corresponding period last year. The trajectory was then followed by UBL and HBL, where a substantial downfall of 58 percent and 57 percent depicted in their provisioning charges, respectively.
As for as individual performance is concerned, UBL and NBP have recorded the highest earnings growth of 11 percent each. It was followed by ABL, which registered a mere growth of 3 percent. On the other hand, HBL and MCB profitability saw a deterioration of 11 percent each during the period under review.
The analysis is based on unconsolidated earnings of top 5 banks (based on deposits). Their combined market share in overall banking deposits stands around 55 percent. Furthermore, the sample companies represent more than 70 percent of the listed banks market capitalisation. These banks include; Habib Bank Limited (HBL), United Bank Limited (UBL), National Bank of Pakistan (NBP), Allied Bank Limited (ABL) and MCB Bank (MCB).
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