The Auditor General of Pakistan (AGP) in its annual report has revealed that the net profit of State Bank of Pakistan (SBP) for 2010-11 declined by 3.1 per cent despite 16.4 per cent increase in interest mark-up and discount income as compared to 2009-10.
The report further revealed that the decline in profitability was mainly due to "(a) other operating loss of Rs 11.598 billion during the year 2010-11 against other operating income of Rs 10.465 billion during 2009-10; (b) decline in exchange gain by Rs 9.78 billion (83.5 of last year); and (c) increase of Rs 3.696 billion (38.1 per cent of last year) of interest/mark-up expense".
The Audit further noted that increase of 2.8 per cent in the interest paid as a percentage of working funds for 2010-11 had caused a decline in the Spread Ratio for the year by 1.7 per cent, which means that net amount which the Bank utilises in meeting its operating, administrative and management expenses declined. At the same time, a 7.2 per cent decline in the ratio of non-interest income as percentage of working funds resulted in an increase in burden ratio by 7.05 per cent, which reflected adversely on the management of non-interest expenses and non-interest income. A decreasing spread ratio and an increasing burden ratio were not a healthy sign for the profitability of the Bank and required corrective measures, the report added.
The leverage ratio declined by 1.6 per cent for the year 2010-11 depicting deterioration in capital adequacy by 15.2 per cent. This implies dependence over funds outside Bank's resources had increased during the period under review. "Foreign currency reserves of issue department significantly declined by Rs 72.025 billion, registering a decrease of 15.3 per cent as compared to last year," the report revealed.
The current ratio for 2010-11 was 1.23 times, registering a decline of 13.5 per cent as compared to last year. This was mainly due to deficiency of Rs 2.142 trillion of Non-Interest Bearing Finance Assets over Financial Liabilities as on June 30, 2011. The Audit noted an increase of 23.7 per cent in deficiency of these financial Assets. The Audit maintained that management was required to make efforts to minimise its credit risk over non-interest bearing financial instruments.