All commercial banks combined showed a profitability growth of 27 percent to Rs 60 billion in first half of CY12 compared to Rs 47 billion in first half of CY11. According to research report of Investcap, total increase in profit was made up of Rs 214 million or two percent contributed by Public Sector Commercial Banks, Rs 13 billion or massive 101 percent by Local Private Banks (LPBs) and a decline of two percent by the Foreign Banks (FBs) during January-June of 2012.
Due to the slowdown in the economy of the country the banks prefer to place their assets into investments specifically in government papers like T-bills and PIBs as a result their advance to deposit ratios are stagnant. The non-interest income of the banking sector has bolstered the bottom-line of the banks and banks showed a decent profit during first half of CY12.
Investcap Research has presented an update on the profitability of commercial banks for first half of CY12. The 28 commercial banks are divided into three major categories including public sector commercial banks, local private commercial banks and foreign banks.
The five public sector banks in the country (Sindh Bank newly operational) showed stagnant behaviour in profitability during the H1 of 2012 compared to last year. Profit after tax of this particular category stood at Rs 9.5 billion as compared to Rs 9.3 billion recorded during the same period last year.
This performance mainly attributed from the decline in Net Interest Income (NII) which was down by one percent YoY, however, NII remained positive on quarterly basis and increased by four percent QoQ. The interest income of this category rose by 10 percent YoY, while the interest expense subdued the margin, with an increase of 20 percent YoY, the NIM was down by one percent YoY.
Despite the growth of 10 percent witnessed in advances (from Rs 689 billion in December-11 to Rs 769 billion in June 2012) the spreads of the public banks have remained sluggish in the region of 1.8 percent (average spread of the said category) in Jun-12. Total deposits of public banks amounted to Rs 1.3 trillion, up from Rs 1.25 trillion in June 2012. Hence the advances to deposit ratio (ADR) of this category comes out to be 59 percent, and the investment to deposit ratio (IDR) has reached to 35 percent in Jun-12, down from 38 percent in December-11.
According to Investcap report on bank's profitability, Local Private Banks' category that has 16 participants to its name, showed a growth in profitability of 38 percent YoY from Rs 34 billion in first half of CY11 to Rs 47 billion in first half of CY12. This growth was mainly led by low provisioning booked by the banks along with 28 percent YoY increase in non-interest income (13 percent YoY fee income and brokerage) during first half of CY12.
The net interest income of the Local Private Banks grew by meagre pace (two percent YoY) to Rs 115 billion in January-June of CY12 from Rs 114 billion in same period of CY11. The advances of Local Private Banks stood at Rs 2.4 trillion, appreciated by 6.9 percent in Jun-12 as compared to Rs 2.2 trillion recorded in December-11.
Deposits of Local Private Banks increased from Rs 4.2 trillion in December-11 to Rs 4.7 trillion in Jun-12 showing a growth of 11 percent during CY12. Hence the ADR of Local Private Banks declined from 56 percent to 58 percent. On the other hand, the investment to deposit ratio of Local Private Banks remained in the range of 50 percent - 52 percent during the last six months.
The Investcap report revealed that Foreign Banks profits have down by eight percent YoY in first half of CY12. Total profit of this category amounted to Rs 3.3 billion, down from Rs 3.6 billion in first half of CY11. Decline in NII was recorded at four percent YoY, while non-interest income grew by three percent YoY. Deposits of this category amounted to Rs 407 billion in Jun-12, remained stagnant and showed a scarce growth of one percent from December-11 level of Rs 402 billion. On the other hand, advances of foreign banks grew by two percent from Rs 223 billion in December-11 to Rs 227 billion in June 2012.