Banking industry’s profits soars by 24pc in 9 months

Major banks post combined net profit after tax of Rs 75.0bn

The banking sector’s total net profit has once again increased to Rs 93.7 billion in nine months during 2012 against profit of Rs 75.5 billion in the corresponding period of 2011.

Analysts attached their preference to the larger banks with a selective liking for United Bank Limited, Bank Alflaha and National Bank of Pakistan.

The big six banks having assets approximately Rs 400 billion posted combined net profit after tax of Rs 75.0 billion in nine months of 2012, up 17 percent and accounting for 80 percent of listed commercial bank profits.

The aggregated profits in three quarters of 2012 have reached Rs 30.8 billion, down 2.0 percent on quarterly basis on an uptick in provisions with coverage levels likely to have inched up. Net Interest Income (NII) surprisingly remained flat sequentially with balance sheet growth countering some Net Interest Margins (NIM) compression. With non-interest income remaining largely unchanged on a quarterly basis, it appears banks are keeping capital gains in stock for utilisation across the next quarter and first half of calendar year 2013, particularly if NII starts to come off, analysts said.

All listed banks will round off 2012 on a strong note with potential to sustain earnings in 2013 even if interest rates remain close to single digit.

The 10 medium banks with assets vary from Rs 100 billion to Rs 400 billion posted combined profit of Rs 16.4 billion in nine months of 2012, up a strong 31 percent. The growth was broad-based with NII up 10 percent on yearly basis, provisions lower by 32 percent and noninterest income up 22 percent.

The six small banks with assets ranging from Rs 100 billion posted combined profit of Rs 2.3 billion in nine month of 2012 versus a combined loss of Rs 1.0 billion in the corresponding period of pervious year.

The smaller banks continue to be plagued by relatively weak capital strength, low coverage levels and lack of scale efficiencies. However, NII has done well – up 33 percent YoY in 9MCY12 and 12 percent QoQ in 3Q 2012.

All banks have posted strong results in third quarter of 2012 even as NIMs have come off due to monetary easing. Despite NIM compression concerns amidst asset re-pricing and potential cuts in the discount rates.

While NII came off by 3 percent on yearly basis, the earnings growth in nine months of calendar year 2012 has been driven by a 41 percent yearly basis reduction in total provisions and a 34 percent increase in non-interest income. In the third quarter of 2012, combined big six profits clocked in at Rs 24 billion, down 5.0 percent on quarterly basis on lower NII (tighter NIMs) even as total provisions came off by 8.0 percent on quarterly basis.