KARACHI: The Board of Directors of National Bank of Pakistan (NBP) “the Bank” met to approve the annual financial statements for the year ended December 31, 2022.

The Bank has delivered yet another year of strong financial results, and posted a pre-tax profit of Rs 62.7 billion, depicting an annual increase of 18.7 percent. With strong income momentum across its businesses segments, the Bank’s fund-based net interest income was particularly strong. Amidst the challenging macro environment, the Bank has continued to provide support for its customers and clients in line with its vision.

The 40 percent growth in average earning assets, coupled with margin expansion through higher policy rates, generated gross interest income of Rs 503.3 billion i.e. 117 percent higher than Rs 231.9 billion for 2021. Pursuant to an effective fund mobilisation, average interest bearing liabilities of the Bank reached Rs 3,871.9 billion (2021: Rs 2,692.9 billion).

Consequently, in the backdrop of higher average interest rate, the Bank’s cost of funds amounted to Rs 386.5 billion. Accordingly, net interest income for the year closed at Rs 116.8 billion, depicting a YoY increase of 19.7 percent.

Despite a challenging business environment and lower trade activity, the Bank maintained its non-fund income stream that amounted to Rs 36.7 billion (2021: Rs 36.9 billion). Equity investments of the Bank generated dividend income of Rs 5.2 billion, 13.3 percent higher YoY. Fee and commission income earned through banking operations amounted to Rs 21.2 billion i.e. 18.8 percent higher YoY and are reflective of the Bank’s widespread customer base and market outreach.

As the Bank provides FX solutions to a large number of corporates, its forex income for the year amounted to Rs 7.4 billion which is 14.4 percent higher YoY. However, due to a lacklustre performance of the stock market, the Bank could generate capital gains of Rs 1.1 billion as compared to Rs 6.2 billion last year. Consequently, total income for the year amounted to Rs 153.5 billion, i.e. Rs 18.95 billion or 14.1 percent higher, YoY.

Reflecting the inflationary impacts, ad hoc allowance allowed to the employees and the Bank’s investment into its IT systems and upgrade of business premises, operating expenses for the year amounted to Rs 78.2 billion (2021: Rs 60.0 billion).

Pursuant to a prudent strategy to strengthen the capital base, a provision charge of Rs 12.6 billion was created during the year. This is particularly important in the backdrop that IFRS 9 stands implemented effective January 01, 2023. As the Bank held Rs 190.7 billion in specific provisions against NPL of Rs 205.3 billion, depicting a high coverage ratio at 93 percent.

Accordingly, the Bank’s pre-tax profit for the year amounted to Rs 62.7 billion i.e. 18.7 percent up against Rs 52.9 billion for the prior year. As a result of retrospective taxation and increase of 10 percent in the income tax rates for banks (from 39 percent to 49 percent), tax charge amounted to Rs 32.3 billion, translating into an effective tax rate of 51.5 percent as compared to 47.0 percent for the year 2021. Resultantly, profit after tax for the year amounted to Rs 30.4 billion i.e. 8.6 percent higher than Rs 28.0 billion for 2021.

This year, the Bank achieved Rs 5 trillion milestone in its balance sheet that grew by 36.2 percent to reach Rs 5,240.4 billion from Rs 3,846.7 billion at the end of 2021. This makes NBP the largest Bank in Pakistan in terms of total assets. While investment (net) increased by 79.4 percent to reach Rs 3,477.4 billion, gross advances recorded 10.2 percent growth to reach Rs 1,438.6 billion. With this growth, the Bank’s advances-to-deposits ratio improved to 54 percent as compared to 43 percent at the end of 2021.

With a widespread and well-diversified market outreach, the Bank maintains a strong funding and liquidity profile. At the year end, total deposits amounted to Rs 2,666.2 billion as compared to Rs 3,019.2 billion at the end of 2021. This drop in deposits is based on the Bank’s focussed strategy to reduce high cost deposits so as to deliver higher after-tax profit to its shareholders. Major share of the Bank’s deposits comes from sticky customer deposits that contribute 98.1 percent of the total deposits.

With current deposits amounting to Rs 1,310.2 billion or 49.1 percent of the total deposits, the Bank maintains a strong liquidity profile. While CASA ratio stood at 79.4 percent, Liquidity Coverage and Net Stable Funding also remained high at 195 percent and 251 percent, respectively. While shareholders’ net assets increased by 5.1 percent YoY to Rs 300.8 billion, capital adequacy ratio improved by 120bps to 21.59 percent from 20.39 percent at YE ’21. The Bank enjoys highest credit ratings of AAA / A1+ for both long term and short term respectively as reaffirmed separately by both PACRA as well as VIS Credit Rating Company in June 2022.

Commenting on the annual performance, the Bank’s President/CEO (A), Rehmat Ali Hasnie, said that the excellent strategic delivery and financial results were testament to the efforts & dedication demonstrated by the Bank’s employees in serving the Nation through these challenging times.

The Bank is pursuing a major organisational and technological transformation, product enhancement, digitalization and initiatives for promoting financial inclusion with a focus on commercial and rural segments. In parallel with its business growth initiatives, the Bank has also continued to progress via remediation of legacy issues.

As the Nation’s Bank, going forward, NBP’s strategy focuses on enhancing its service quality levels, diversifying its outreach through digitalization, and increasing its products and services suite.

Copyright Business Recorder, 2023