Commercial BANKS NATIONAL BANK OF PAKISTAN - Year Ended December 31, 2005 (Audited)

18 May, 2006

NBP has been established under the National Bank of Pakistan Ordinance, 1949 and is listed on all the stock exchanges in Pakistan.
The bank is engaged in providing commercial banking and related services in Pakistan and overseas. NBP operates 1,224 (2004: 1,208) branches in Pakistan and 18 (2004:18) overseas branches (including the EPZ branch, Karachi). NBP shares are largely held by the SBP/GOP (nearly 75% of total) while some shares have been offered to general public as well.
As an agent to the SBP, NBP handles treasury transactions for GOP. In addition, under a Trust Deed, the bank provides services as trustee to National Investment Trust including safe-custody of securities on behalf of NIT. Besides, the bank is involved in managing the Qarz-e-Hasna Fund (loans for education of the deserving students) on behalf of the SBP. Further, upon the NDFC amalgamation, NBP manages on behalf of GOP, the Long Term Credit Fund established from the proceeds of the loans disbursed by various international funding agencies for financing private sector energy development projects. Fund assets are accounted for separately from those of the bank and amounted to Rs 41 billion on December 31, 2005 (2004: Rs 45 billion).
NBP has five wholly-owned subsidiaries: (i) NBP Capital Limited; (ii) CJSC, Subsidiary Bank of NBP in Kazakhstan; (iii) NBP Exchange Company Limited; (iv) NBP Modaraba Management Company Limited; and (v) National Agriculture & Storage Company Limited. NBP has two other subsidiaries, Taurus Securities Limited and Cast-N-Link Products Limited, the ownership interest is 58% and 77% respectively. NBP has two joint ventures, United National Bank Limited (UNBL) and National Fulletration Asset Management (NAFA). NBP share in UNBL is 45% and share in NAFA is 30% as on December 31, 2005.
The Overview of financial statements hereunder, however, is that of NBP alone, without consolidation with the subsidiaries companies. On exemption granted by the SECP, NBP has not prepared consolidated financial statements for the year ending December 31, 2005.
NBP also holds 5.83% equity stake in Bank Al-Jazira incorporated in the Kingdom of Saudi Arabia. During the year, NBP was granted permission to open a branch in Saudi Arabia by the Saudi Arabian Monetary Authority and the bank is taking necessary measures for that. However, NBP has been given to understand by the SAMA that it has to divest the holding in Bank Al-Jazira. From current year the NBP investment in Bank Al-Jazira has been marked to market with closing price as quoted on the Saudi Stock Exchange.
According to the Directors' Report, Moody's upgraded the bank's financial strength rating to "D-" from "E+" reflecting the bank's improving financial condition as well as its important franchise and leading market share in Pakistan.
JCR-VIS has assigned the medium to long term entity rating of "AAA" (Triple A) and short term rating of "A-1+" (A-One Plus) to NBP. It has also assigned to it on a stand-alone basis ie the medium to long term rating of "AA+" (Double A Plus) and the short term rating at "A-1+" (A-One Plus). The number of bank employees as on December 31, 2005 was 13,824 (2004: 13,745 employees).
Total assets of NBP saw 4% increase to Rs 578 billion on December 31, 2005 compared to Rs 553 billion as on December 31, 2004. It may be noted that assets held in the fiduciary capacity are not treated as assets of the bank in the balance sheet. On December 31, 2005 Investments increased 5% to Rs 157 billion (27% of Total Assets) compared to Rs 149 billion (27% of TA) as on December 31, 2004. Of the total, NBP has 80% investments in Held to Maturity Securities (2004: 80%).
NBP's Advances as on December 31, 2005 were Rs 269 billion (40% of Total Assets), registering 22% increase over 2004 Advances at Rs 221 billion (47% of TA). On December 31, 2005, 87% Advances (2004: 85%) were in local currency, while 58% (2004: 63%) of the total Advances were for short term. Of the gross Advances, 18% were in the public sector as on December 31, 2005. Major exposure of NBP on December 31, 2005 is in Textile (19%), Individuals (13%), Oil & Gas (8%), Agribusiness (5%), Cement (3%), Financials (4%), Telecommunication (3%), Public Sector Commodity Operations (5%) and General Traders (3%).
As on December 31, 2005, the authorised capital of NBP stood at Rs 7.5 billion comprising 750 million ordinary shares of Rs 10 each. The paid up capital on this date was Rs 5.909 billion. NBP's equity on December 31, 2005 was Rs 36 billion (6.3% of Total Assets). If Surplus on Revaluation of Assets of Rs 38 billion is added, equity stake as on December 31, 2005 stands at Rs 74 billion (13% of TA). Major element for high Surplus on Revaluation of Assets pertains Bank Al-Jazira in an amount of Rs 21.647 billion as on December 31, 2005 (2004: Rs 4.972 billion). As on December 31, 2005 gross NPLs were Rs 34 billion (2004: Rs 36 billion). In percentage terms gross NPLs on December 31, 2005 were 11% of gross Advances (2004: 14% of GA). On Net basis, NPLs are 2% of Advances as on December 31, 2005 (2004: 3% of Advances).
It may be noted that NBP has made full provision against NPLs according to the SBP criteria. However, as some doubtful loans have the tendency to stay under cover for sometime due to different reasons, a prudent policy for NBP would be that the management remains extra vigilant in the appraisal and monitoring of all loans.
Total revenues of NBP for 2005 increased by 61% to Rs 34 billion compared to Rs 21 billion for the previous year. Net interest income (after provisions) for 2005 experienced 67% increase to Rs 21 billion (2004: Rs 13 billion). Total mark up-interest expense represented 31 % of total mark up income for 2005, the same level as for 2004. There has apparently been no improvement in the payout by the bank to the Depositors. NBP, being the public sector largest bank in the country, is expected to set an example for other banks to follow by paying positive return in real terms to the Depositors.
Non-mark up income of the bank for 2005 was higher at Rs 9 billion as against Rs 8 billion for 2004. The year 2005 was closed by the bank with After-tax Profit of Rs 13 billion (2004: Rs 6 billion). ROE for the year is very attractive 35% (2004: 25%). Dividend payout to the shareholders was 45% (2004: 35%). Performance statistics are given below.



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Performance Statistics -
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Balance Sheet (Audited) (Rs million)
As on December 31, 2005 2004
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Total Assets: 577,719 553,232
Cash, balances with banks: 102,216 144,232
Lending to financial institutions: 16,283 10,511
Investments-Net: 156,986 149,350
Advances-Net: 268,839 220,794
Borrowing from fin. Institutions: 8,757 11,085
Deposits, other accounts: 463,427 465,572
Total Liabilities: 503,378 506,986
Net Assets: 74,341 46,246
Share Capital: 5,909 4,924
Reserves & Un-app. Profit: 30,250 19,976
Total Equity: 36,159 24,900
Surplus on Revalue, Assets: 38,182 21,346
Equity incl. Revalue Surplus: 74,341 46,246
Subordinated Loan: 0 0
Equity & Sub. Loans: 74,341 46,246
Advances-Gross: 299,423 249,845
Gross NPLs: 33,738 36,099
Total Provision: 30,584 29,051
Conting. & Commitments: 216,046 156,323
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Ratios:
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Cash & bank/Total Assets: 18% 26%
Investments/Total Assets: 27% 27%
Advance-Net/Total Assets: 47% 40%
NPLs/Advances-Gross: 11.3% 14.4%
NPLs/Total Equity: 93% 145%
NPLs Prov./Advances-Gross: 10.2% 11.6%
Deposits/Total Assets: 80% 84%
Total Liabilities/Total Assets: 87% 92%
Total Equity/Total Assets: 12.9% 8.4%
Equity & Sub. Loans/TA: 12.9% 8.4%
Deposits/Equity-Times: 12.8 18.7
Advances/Deposits: 58% 47%
Investments/Deposits: 34% 32%
Contin.& Comm./Equity-Times: 5.97 6.28
Book Value Per Share: 61.19 50.57
Quoted Price (05-05-06) - Rs: 281.20 -
Price/Book Value Ratio: 4.60 -
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Income Statement 2005 2004
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Markup-interest earned: 33,634 20,947
Markup-interest expensed: 10,322 6,559
Net Markup-interest income: 23,312 14,388
Provisions and write offs: 2,224 1,748
Net mark up income (aft. Prov.): 21,088 12,640
Total non-markup income: 9,425 8,257
Income before. Admn. Exp.: 30,513 20,897
Admin Expenses, etc: 11,457 8,919
Profit before Taxation: 19,056 11,978
Current & deferred tax: 6,347 5,783
Profit after taxation: 12,709 6,195
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Ratios: (Annual Basis)
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Markup earned/Total Assets: 5.8% 3.8%
Net Markup Income/TA: 4.0% 2.6%
Net markup (aft. Prov.)/TA: 3.7% 2.3%
Non-Markup Income/TA: 1.6% 1.5%
Income before AE/TA: 5.3% 3.8%
Admin Expenses/TA: 2.0% 1.6%
Profit before Taxation/TA: 3.3% 2.2%
Profit after taxation/TA: 2.2% 1.1%
Profit after tax/Total Equity: 35.1% 24.9%
EPS- (year-end paid up) - Rs: 21.51 12.58
Price/Earnings Ratio: 13.07 -
Cash Dividend: 25% 15%
Bonus Shares: 20% 20%
Cash flow Summary 2005 2004
Net Cash flow, Operations: -54,929 30,893
Net Cash flow, Investing: 14,291 30,040
Net Cash flow, financing: -757 -536
Change in Net Liquidity: -41,412 60,540
Net Liquidity at beginning: 142,995 82,455
Net Liquidity at end: 101,583 142,995
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COMPANY INFORMATION: Chairman: and President: S. Ali Raza; Director: Dr Waqar Masood Khan; SEVP & Group Chief, Corporate & Investment: Masood Karim Shaikh; Secretary to Board of Directors: Ekhlaq Ahmed; Auditors: 1- Taseer Hadi Khalid & Co, Chartered Accountants; 2- Ford Rhode Sidat Hyder & Co, Chartered Accountants; Legal Advisor: Mandviwala & Zafar, Advocates and Legal Consultants Registered & Head Office: National Bank Building, I.I. Chundrigar Road, Karachi Web Address: www.nbp.com.pk

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