The Bank of Punjab (BOP) rode on the exemplary top line growth, which trickled down to the bottom line, posting a double digit pretax profit growth year-on-year. Unlike other similar sized banks, BoP took a slightly different route to asset building, with all the increase coming from investments instead of advances.

The investments increased by Rs64 billion to Rs274 billion as at June end 2019, depicting growth of 30.6 percent over December 2018. The investment breakup is not known yet, but with the massively changed interest rate dynamics and outlook, the focus on short term bills has increased of late. The IDR as a result, jumped from 35 percent at December end 2018, to 41 percent as at June end 2019.

Advances, on the other hand, remained lackluster, owing mostly to the challenging economic conditions, slowdown in commodity prices and a negative growth in large scale manufacturing. The appetite for private sector credit has visibly dwindled, and the BoP seems to be focusing on keeping the books clean in times of high interest rates, which could potentially add more to the NPLs, which were well in double digits by March end 2019.

It was a massive increase in provisioning charges, with an impact of over Rs2 billion that kept the post provisioning profits in check. The reversal to the tune of rs1 billion in the same period last year, became a provisioning charge of nearly the same amount, limiting the bottom line growth. That said, the top line growth based on higher earning yields on assets, was sufficient to ensure a decent bottom line growth.

The growth on the liabilities front at nearly 12 percent over December 2018 was higher than the industry average. Details of deposits mix are not known yet, but given the industry trend, a much improved mix with higher contribution from saving and current account, would possibly be the order of the day. And that is much needed too, in times of squeezed spreads, and difficult macroeconomic environment.