KARACHI: The Board of Directors of National Bank of Pakistan (NBP) met on Thursday to approve the annual financial statements for the year ended December 31, 2023.
NBP, the Nation’s Bank, has marked yet another year of robust financial outcomes, achieving a pre-tax profit of Rs101.3 billion presenting a 61.4 percent increase from the preceding year’s Rs62.7 billion.
The Bank navigated a challenging macro environment, sustaining its support to customers in line with its Vision.
This year witnessed the creation of total stakeholders’ value amounting to Rs1,065.3 billion, doubling the Rs540.0 billion of the previous year.
A 35.4 percent surge in average earning assets, coupled with margin expansion on the back of higher average policy rates, generated gross interest revenue of Rs1,024.7 billion — 103.6 percent higher than Rs503.3 billion for 2022.
Healthy growth was achieved in all income streams being Advances (Rs221.8 billion, 57 percent up), Investments (Rs774.0 billion, 122 percent up), and Placements (Rs28.9 billion, 112 percent up). Pursuant to an effective fund mobilisation, average interest bearing liabilities of the Bank reached Rs5,267.8 billion (2022: Rs3,871.9 billion).
In the backdrop of higher average interest rate, Rs855.9 billion was paid to the providers of funds in terms of cost of funds. Accordingly, the Bank’s net interest income for the year closed at Rs168.7 billion, depicting a YoY increase of 44.4 percent.
Despite lower trade activity amidst a challenging and uncertain business environment, the Bank achieved a 10.7 percent growth in its non-fund income stream that amounted to Rs40.6 billion (2022: Rs36.7 billion).
While equity investments of the Bank generated dividend income of Rs5.3 billion (2022: Rs5.2 billion), income under fee and commission stream amounted to Rs22.0 billion (2022: Rs21.2 billion), and are reflective of the Bank’s widespread customer base and market outreach.
The Bank’s FX income for the year closed at Rs7.1 billion which is slightly lower than Rs7.4 billion for the prior year due to adverse impact on account of forward exchange contracts rates.
Whereas, given the bullish trends of the stock market during most days of the years, the Bank generated, mostly through its equity portfolio, capital gains of Rs4.4 billion, depicting a 285 percent increase over Rs1.1 billion of the corresponding year.
Consequently, total income for the year amounted to Rs209.4 billion, i.e., Rs55.8 billion or 36.4 percent higher, YoY.
Reflecting the impacts of inflationary impacts, yearly increase in HR compensation, and the Bank’s investment into its IT systems and upgrade of business premises, operating expenses for the year amounted to Rs93.3 billion, depicting a YoY increase of 19.5 percent against Rs78.2 billion in 2022.
Pursuant to a prudent strategy of strengthen the Bank’s capital base, a provision charge of Rs14.5 billion was created during the year.
This is particularly important in the backdrop that International Financial Reporting Standard 9 stands implemented effective January 01, 2024. Implementation of the standard is likely to attract higher provisioning resulting into decreased regulatory capital and lending capacity of the banks.
Pursuant to its prudent strategy of strengthening the capital base, the Bank holds Rs203.6 billion in specific provisions and Rs30.0 billion in general provisions against distressed loan portfolio, depicting a high specific coverage ratio at 92.2 percent.
Accordingly, the Bank’s pre-tax profit for the year amounted to Rs101.3 billion i.e., 61.4 percent up against Rs62.7 billion for the prior year.
Tax charge for the year amounted to Rs49.4 billion, translating into an effective tax rate of 48.8 percent compared to 51.5 percent for the prior year. Resultantly, profit after tax for the year amounted to Rs51.8 billion i.e., 70.5 percent higher than Rs30.4 billion for 2022.
Maintaining its leading market position, the Bank achieved Rs6.5 trillion milestone in its balance sheet that grew 27 percent to reach Rs6,652.7 billion from Rs5,240.4 billion at the end of 2022.
This makes NBP the largest Bank in Pakistan in terms of total assets. While investment (cost) increased by 25.2 percent to reach Rs4,393.9 billion, gross advances recorded 13.4 percent growth to reach Rs1,631.7 billion depicting an advances-to-deposits ratio at 44 percent.
With a nationwide well-diversified market outreach, the Bank maintains a strong funding and liquidity profile. At the year end, total deposits amounted to Rs3,674.4 billion being 37.8 percent higher than Rs2,666.2 billion at the end of 2022. Major share of the Bank’s deposits comes from sticky customer deposits that contribute 86.2 percent of the total deposits.
With current deposits amounting to Rs1,970.5 billion or 54 percent of total deposits, the Bank maintains a strong liquidity profile. While CASA ratio stood at 79 percent, Liquidity Coverage Ratio and Net Stable Funding Ratio also remained high at 176 percent and 259 percent, respectively against a regulatory requirement of 100 percent for each.
The Board deliberated at length whether or not cash dividend should be recommended. However, the likely impact of the pension case and other contingencies still remains a cause of concern for the Board.
Accordingly, the Board considered it prudent to retain the profits for the time being and once the position becomes clearer, the Bank may consider declaration of dividend at a later stage. With high profits retention, the Bank’s total eligible capital stood increased at Rs376.7 billion, depicting a Rs70.5 billion or 23.0 percent increase YoY. Consequently, total capital adequacy ratio improved by 388bps to 25.47 percent from 21.59 percent at YE’22.
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 2023.
Providing insights into the yearly performance, Rehmat Ali Hasnie, the President/CEO of the Bank, expressed that the outstanding strategic execution and financial outcomes underscore the commitment and dedication exhibited by the Bank’s workforce in serving the nation during challenging periods.
The Bank is actively engaged in substantial organizational and technological transformations, augmenting product suite, embracing digitalization, and launching initiatives to foster financial inclusion, particularly emphasizing SME, commercial and rural sectors. Simultaneously advancing its business growth endeavours, the Bank is dedicated to addressing legacy issues through ongoing remediation efforts.
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, 2024