Small banks show earning growth of 17pc to Rs14.9b

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THE NATION, LAHORE, 30th SEPTEMBER 2013:- The small banks showed a positive earnings variance of 17 per cent to Rs14.9 billion in first half of 2013 which is much better than12 per cent fall in the profitability of more stable big 5 banks. Statistics showed that the growth rate still stands at 10 per cent even after adjusting SCBPL abnormal provisions reversals, as SCBPL recorded Rs1.1 billion reversal of provisions against NPL in 2Q2013 versus expense of Rs202 million in 1Q2013.
According to banking sector experts, the progress in small banks is mainly achieved by 43 per cent annually decline in provisions to Rs2.6 billion (after adjusting SCBPL reversal) and 8 per cent higher non-interest income to Rs25.0 billion in 1H2013. Further steady NII at Rs48.8 billion also showed some signs of stability in core banking operations. Similarly, on quarter on quarter basis, profits of these banks also improved by 45 per cent to Rs8.8 billion in 2Q2013 (up 30 per cent QoQ to Rs8 billion after adjusting SCBPL).
Latest data reveals that in 1H2013, BOP, SCBPL and FBL showed significant improvement of 147 per cent, 87 per cent and 49 per cent YoY to Rs1 billion, Rs4.7 billion and Rs755mn, respectively while HMB reported 35 per cent QoQ growth in profits to Rs1 billion in 2Q2013. Significant decline in provisions and higher non-interest income supported earnings of these banks (except for FBL) while 10-12 per cent better NII of FBL and BOP also provided the stimulus.
Money market expert Zeeshan Afzal observed that declining yields on advances and government papers (due to 300bps cut in discount rate in last 13 months) and rising deposit costs (on imposition of 6 per cent min deposit rate on average saving deposits) have led to 98bps decline in banking spreads to 6.25 per cent in 1H2013. As a result, NII (Net Interest Income) of selected 20 banks has declined by 5 per cent YoY to Rs141.4 billion in 1H2013. However, on the positive side, 14 per cent decline in provisions to Rs9.9 billion and 7 per cent improvement in non-interest income to Rs63.6 billion mitigated much of the negativity.
Though, earnings declined during 1H2013 when compared to same period last year, things have turned around in 1H2013. On sequential basis, quarterly profits of these banks improved by 14 per cent to Rs29.8 billion.
This time 3.8 per cent improved NII to Rs72.0 billion in 2Q2013 was the added stimulus despite 20.4 per cent QoQ progress in non-interest income to Rs33.8 billion.

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