"Institutionalising a merit and performance culture" is the top most value by which National Bank of Pakistan aspires to make NBP truly the Nation's Bank. This is good; however, it may be mentioned that the litmus test for becoming the Nation's Bank is fair payout to the common depositors.
The bank was incorporated under the NBP Ordinance, 1949 and is listed on all the stock exchanges of the country. The bank is engaged in providing commercial banking and related services in Pakistan and overseas. The bank operates 1,232 (2005: 1,224) branches in Pakistan and 18 (2005:18) overseas branches including the EPZ branch, Karachi, through 14, 019 employees.
NBP also handles treasury transactions for the GoP as an agent to SBP. Under a Trust Deed, the bank provides services as Trustee to National Investment Trust (NIT) including safe-custody of securities on behalf of NIT. Further, upon amalgamation of NDFC into the bank, NBP manages on behalf of GoP, the Long Term Credit Fund (LTCF) established from proceeds of loans disbursed for financing private sector energy development projects.
Fund assets are accounted for separately from those of the bank and amounted to Rs 38 billion on December 31, 2006 (2005: Rs 41 billion). In view of the persisting power shortages and load-shedding in the country, GoP/NBP may consider reviving the financing activities of LTCF in accordance with the present day requirements.
NBP has five wholly-owned subsidiaries, two majority-owned companies and two joint ventures including United National Bank Limited and National Fullerton Asset Management (NAFA) and 10 associates including First Credit & Investment Bank Limited. The Overview of financial statements hereunder, however, is that of NBP alone, without consolidation with its subsidiaries.
According to the Directors' Report, Moody's has maintained NBP's financial strength rating at D- reflecting the bank's important franchise and leading market share in Pakistan. JCR-VIS has also maintained the bank's medium to long term stand alone rating at "AA+" and has reaffirmed the bank's entity rating at "AAA"/"A-1+".
Authorised capital of NBP is Rs 7.5 billion, comprising 750 million shares of Rs 10 each. As on December 31, 2006 the paid up capital was Rs 7.091 billion which was held by 10,321 shareholders, of which 9,842 shareholders (general public) held about 5% shares.
NBP shares are largely (about 76%) held by SBP/GoP. Rest of the shares were distributed among a number of corporate entities including banks and DFIs. Total assets of NBP increased by 10% to Rs 635 billion on December 31, 2006 compared to Rs 578 billion on December 31, 2005. Increase has occurred in Lending to Financial Institutions (41%) and Advances (18%).
Apart from retention of profits, the increase in assets has been financed through 8% increase in Deposits to Rs 502 billion (79% of Total Assets) on December 31, 2006 compared to Rs 463 billion (80% of TA) on December 31, 2005.
NBP's Advances on December 31, 2006 at Rs 316 billion are 50% of Total Assets (2005: 47% of TA). On this date, gross NPLs are Rs 36.260 billion (2005: Rs 33.738 billion). In percentage terms gross NPLs are 10.4% of gross Advances (2005: 11.3% of GA), against which provision has been made as required.
The level of NPLs is high and NBP management must not lower its guard because quite a few 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 appraisal, approval, documentation, disbursement and monitoring of all loans. NBP with its large branch network might also be exposed to various risks particularly operational risks against which internal controls may be strengthened.
Of the Total Investment as on December 31, 2006, Available for Sale Investment comprised 52% (2005: 51%). Investment in TFCs, Bonds, PTCs, etc include Rs 705 million (2005: Rs 741 million) which are considered non-performing. The bank's investment in NIT Units and shares of Bank Al-Jazira, Saudi Arabia contribute upto 93% of total Surplus on Revaluation of Assets as on December 31, 2006 at Rs 28.909 billion.
In respect of NIT Units, notes 9.6 to the financial statements mentions the Letter of Comfort provided by GOP and the concurrence of the State Bank of Pakistan to the valuation of units at market value. Note 9.8 deals with the investment in Bank Al-Jazira, which has been marked to market in accordance with SBP's concurrence.
According to note 41 to the financial statements, Capital Adequacy Ratio of the bank on December 31, 2006 is 16.50% (2005: 15.39%) as against prescribed minimum equivalent to 8% of the risk weighted assets of the banking company.
Total mark up income of NBP for the year ended December 31, 2006 increased by 30% to Rs 44 billion compared to Rs 34 billion for the previous year. Net mark up income as percentage of Total Assets was as high 4.7% (2005: 4.0%). Total mark up expense represented only 31 % of total mark up income for the year under review (2005: 31%). Relatively very low payout to the common Depositors could be the main factor for high profitability of the bank.
NBP, the Nation's Bank and SBP are urged to consider linking the minimum return to common depositors to Kibor. A positive initiative by NBP in this regard, might also induce many other banks to pay fair return on deposits from common Depositors, the backbone of all the banks.
The year review was closed with After-Tax Profit at Rs 17.022 billion, registering an increase of 34% over previous year's profit at Rs 12.709 billion. ROE for the year at 20.8% (2005: 16.8%) is impressive. Performance statistics are given below.
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Performance Statistics (Audited)
(Rs million)
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Balance Sheet (As on December 31,) 2006 2005
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Total Assets: 635,133 577,719
Cash, balances with banks: 119,267 102,216
Investments-Net: 139,947 156,985
Advances-Net: 316,110 268,839
Borrowing from fin. Institutions: 11,704 8,757
Deposits, other accounts: 501,872 463,427
Total Liabilities: 553,179 501,901
Net Assets: 81,954 75,818
Share Capital: 7,091 5,909
Reserves & Un-app. Profit: 45,954 31,727
Equity: 53,045 37,636
Surplus on Revalue, Assets: 28,909 38,182
Total Equity incl.
Revalue Surplus: 81,954 75,818
Advances-Gross: 348,370 299,423
Gross NPLs: 36,260 33,738
Total Provision: 32,260 30,584
Conting. & Commitments: 294,522 216,046
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Ratios: 2006 2005
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Cash & bank/Total Assets: 19% 18%
Investments/Total Assets: 22% 27%
Advance-Net/Total Assets: 50% 47%
NPLs/Advances-Gross: 10.4% 11.3%
Provision for NPLs/Advances-Gross: 9.3% 10.2%
Deposits/Total Assets: 79% 80%
Total Liabilities/Total Assets: 87% 87%
Equity/Total Assets: 8% 7%
Equity incl. R. Surplus
/Total Assets: 12.9% 13.1%
Deposit/Equity-Times: 9.46 12.31
Deposits/Equity incl.
R Surplus-Times: 6.12 6.11
Advances/Deposits: 63% 58%
Investments/Deposits: 28% 34%
Conting.& Comm./Equity-Times: 3.59 2.85
Book Value Per Share: 115.57 128.31
KSE Price/Share (21-06-07) Rs: 259.05 -
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Income Statement (Y end December 31,) 2006 2005
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Markup-interest earned: 43,789 33,693
Markup-interest expensed: 13,635 10,322
Net Markup-interest income: 30,154 23,371
Provisions and write offs: 2,372 2,224
Net mark up income (aft. Prov.): 27,782 21,147
Total non-markup income: 12,163 9,392
Income bef. Admn. Exp.: 39,945 30,539
Admin Expenses, etc: 13,634 11,483
Profit before Taxation: 26,311 19,056
Current & deferred tax: 9,289 6,347
Profit after taxation: 17,022 12,709
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Ratios: 2006 2005
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Markup earned/Total Assets: 6.9% 5.8%
Net Markup Income/TA: 4.7% 4.0%
Net markup (aft. Prov.)/TA: 4.4% 3.7%
Non-Markup Income / TA 1.9% 1.6%
Income before AE/TA: 6.3% 5.3%
Admin Expenses/TA: 2.1% 2.0%
Profit before Taxation/TA: 4.1% 3.3%
Profit after taxation/TA: 2.7% 2.2%
Profit after tax/Total Equity: 20.8% 16.8%
EPS- (year-end paid up)-Rs: 24.01 21.51
Price/Earning Ratio: 10.79 -
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Cash flow Summary 2006 2005
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Net Cash flow, Operations: 10,177 -54,929
Net Cash flow, Investing: 8,712 14,291
Net Cash flow, financing: -1,483 -757
Change in Net Liquidity*: 17,229 -41,412
Net Liquidity at beginning: 101,584 142,996
Net Liquidity at end: 118,813 101,584
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