Banks profits climb 48pc to Rs45.5bln in Q3

KARACHI: Profit of the publically-listed banks rose 48 percent year-on-year to Rs45.5 billion in the third quarter of 2019 as net interest income on advances and investments increased amid high interest rate environment, a brokerage report said on Thursday.

“The increase in profitability is primarily on the back of a 33 percent YoY (year-on-year) increase in net interest income and 17 percent YoY growth in non-interest income,” analyst Karim Punjani at Topline Securities said.

Biggest increase was posted by Bank Islami (up 176 percent year-on-year) followed by HBL (rising 175 percent year-on-year) and Meezan Bank (increasing 86 percent year-on-year), according to the report covering financials of 17 banks listed on the Pakistan Stock Exchange.

Cumulative profits of the banks in the nine months (January-September) of 2019 grew 20 percent to Rs127.7 billion. In absolute terms, the highest quarterly profit was earned by MCB bank (Rs5.7 billion) followed by National Bank of Pakistan (Rs5.2 billion) and UBL Bank (Rs5 billion).

In July-September, net interest income of the banks improved 33 percent to Rs158 billion. Average policy rate increased 5.5 percent to 13.25 percent over the last twoyears, resulting in the higher net interest income of thesector.

Net interest income of Meezan Bank, Bank Islami and Standard Chartered Bank recorded the highest pace during the period, up by 87 percent, 73 percent and 52 percent year-on-year, respectively.

“On a sequential basis, NII (net interest income) growth was 9 percent QoQ (quarter on quarter) primarily due to one percentage point hike in July 2019 MPS (monetary policy statement) and delayed asset re-pricing which increased the sector’s interest expenses for the quarter,” Punjani said. “Mid-tier banks outperformed the larger peers in terms of NII growth primarily due to better sensitivity to interest rates.”

Non-interest income during the quarter was up 17 percent year-on-year to Rs46 billion, which was driven by fee income (up 15 percent year-on-year).

Non-interest expense increased 17 percent year-on-year primarily driven by growth recorded in operating expense due to inflation, devaluation and branch expansions. In the third quarter, banks’ foreign exchange income climbed 30 percent in July-September 2019 due to volatility in currency market.

During the third quarter as expected the banking sector recorded provision expense of Rs12.8 billion, rising by 82 percent. The National Bank of Pakistan booked the highest provision of Rs3.4 billion during the quarter, followed by United Bank Limited of Rs2 billion, while Allied Bank Limited registered Rs67 million in provisioning reversal.