Top 5 banks' profits up 6% to Rs 88.3 billion in 2012

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KARACHI: The drastic cut in discount rates and slight increase in minimum deposit rates have reduced the aggregated earning of five leading companies registering a nominal growth of 6.0 percent in 2012 to reach Rs 88.3 billion while pre-tax-profit merely increased to 2.0 percent in the last year as compared with 2011.

The earnings of the banks - MCB Bank, UBL, ABL, HBL and NBP - in the last quarter fell three percent from second quarter due to decline in Net Interest Income (NII) which was compensated by lower provisioning while increase in administration cost was managed by rising non-interest income.

According to a report, NII down by Rs 13.3 billion in 2012 due to cut of 250 basis points in policy rate in 2012 coupled with maintenance of minimum deposit rate at 6.0 percent on PLS accounts affected NII of these banks.

In 2012, the cumulative NII declined by 6.0 percent or Rs 13.3 billion to Rs 197.5 billion as against Rs 210.8 billion during the previous year where NII grew by 15 percent. HBL posted the highest NII growth of Rs 1.2 billon or 2.0 percent to reach Rs 56.1 billion, while ABL's NII fell by Rs 6.8 billion or 27 percent to Rs 18.4 billion.

In 2012 total provisioning of large banks stood at Rs 18.5 billion as against Rs 30.5 billion down by Rs 12.0 billion or 39 percent.

Although decline in interest rates resulted in the shrinking spreads, this fall also caused reclassification of non-performing loans. Resultantly, declining provisions, especially on advances, remained one of the prime supporters of the profitability growth during the year.

The non-interest income balanced by admin costs that witnessed an increase of Rs 17.1 billion or 29 percent led by booming bond and stock market help compensate for rising inflation driven administration charges.

The administration and related costs of these banks grew by Rs 13.8 billion or 13 percent in 2012 to reach Rs 119.5 billion.

The top five banks represent 72 percent of the sector's market capitalisation, over 60 percent of branch network and contributing 55 percent of banking deposits. Except for NBP whose profits were down 8.0 percent, remaining four banks posted improvement in profits in 2012.

In 2011, the five banks profit grew by 20 percent profit growth.

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