NBP – record revenue

National Bank of Pakistan (NBP) has continued expanding its balance sheet, which stands at Rs2.8 billion, showing a nearly 12 percent growth year-on-year. The real story was the all-time high revenue in the bank’s history – as the total income increased by 14 percent year-on-year. Save for abnormally high provision charges during the year, NBP’s profit and loss statement makes a heartening reading for the shareholders.

The top line grew by 22 percent year-on-year, based on both the volumetric growth in asset base, primarily advances, and a significant increase in interest rates during the year. NBP’s gross advances during the year posted an increase of nearly 30 percent, breaching the trillion rupee mark, improving the bank’s ADR ratio, which is now close to 50 percent.

The details of investment breakdown are not known yet, but keeping with the industry trend, it would not be a surprise if the NBP has also followed the footsteps of the peer banks, in shifting the focus from long term PIBs to short term treasury bills – the traces of which are found in the 9MCY18 numbers. On the liabilities front, the deposit growth has been phenomenal at 16 percent over December 2017, crossing the Rs2 trillion mark – growing at a much higher pace than most peers.

NBP’s non-mark-up income also ably supported the bottom-line, growing in double digits, despite lackluster performance of the stock market during CY18. The bank’s treasury arm performed admirably and the contribution from foreign exchange income more than trebled during the year – which more than made up for the slowdown on account of gain on sale of securities.

The latest NPL numbers are yet to be known, but the trend in the past two years has been encouraging, as the bank’s infection ratio has come down to teens from being in the 20s a few years ago. Adequate provisioning for the same has also been made by the bank, comparable to the likes of big private sector commercial banks, close to 90 percent.The administrative expenses grew at a higher rate than the bank would have ideally wanted.

It is easy to forget the NBP carries all the ills of being what it is – a state-owned entity, and from that lens, the bank’s performance on most counts, if not all, is comparable to large sized private banks. The economic slowdown is likely to hamper both the deposit and advances growth in CY19 – but NBP, being state-owned, would likely still be better placed than peers, on both accounts.