Islamabad April 28 2023: National Bank of Pakistan (NBP) earned profit of PKR 10.7 billion for the first quarter ended March 2023 when compared with profit of PKR 9.8 billion earned last year in the same period, according to Bank’s filing to the exchange.
“Amidst the continued challenging economic environment, your Bank has delivered strong financial performance for the three months period ended March 31, 2023. These results depict the resilience of the Bank’s business model, effectiveness of the management’s strategies and the efforts of our staff” says Bank Chairman Ashraf Mahmood Wathra.
For the three months period under review, National Bank generated a Gross Interest Income ‘GII’ of PKR 192.4 Bn as against PKR 79.2 Bn for the similar three months period of 2022. The PKR 113.2 Bn increase in GII is achieved through a robust volumetric growth in average interests earning assets coupled with the impact of higher average policy rate during this period that stood at 17.7% as compared to 9.75% during the same period last year.
During Q1’23, the Bank’s investments portfolio averaged PKR 3,519.2 Bn (Mar’22:PKR 1,984.6 Bn) and generated mark‐up/interest income of PKR 146.2 Bn being PKR 95.8 Bn or 190.2% up against PKR 50.4 Bn for the corresponding Mar’22. This translates into average yield at 16.85% (Mar’22:10.29%). In the higher policy rate environment, the maturity profile of the Bank’s investment book is skewed towards the shorter duration securities under available‐for‐sale category. Similarly, placements, that averaged PKR 66.2 Bn (Mar’22:PKR 110.6 Bn) generated a mark‐up income of PKR 2.7 Bn (Mar’22: PKR 2.7 Bn) at a higher yield of 16.6% as compared to 9.77% for Mar’22.
For the three‐months period, the Bank’s loan book averaged PKR 1,411.4 Bn and generated a mark‐up income of PKR 43.5 Bn i.e. PKR 17.3 Bn or 66.2% higher than PKR 26.2 Bn for the similar period last year. This significant growth was achieved through both, a volumetric growth, as well as the favourable YoY rate variance. Pertinent to mention this high performance was achieved despite the fact that the Bank carries a significant proportion of lower yielding or non‐performing public‐sector loans.
Likewise, on the back of higher average policy rate, the Bank’s cost of funds for Mar’23 recorded a significant YoY increase and amounted to PKR 159.9 Bn as against PKR 53.4 Bn for corresponding period of 2022. The PKR 106.5 Bn or 199.3% YoY increase is mainly recorded in cost of Deposits that amounted to PKR 69.7 Bn (Mar22:PKR 36.3 Bn) and the borrowings/repo costs by PKR 73.8 Bn to close at PKR 88.6 Bn.
Consequently, the Net Interest Income ‘NII’ for the period under review closed at PKR 32.5 Bn, depicting a 26.1% increase against PKR 25.8 Bn of Mar’22.
Non‐Fund Income ‘NFI’ for the Mar’23 recorded a slight decrease to close at PKR 7.5 Bn which is PKR 0.6 Bn or 7.3% lower than PKR 8.1 Bn of Mar’22. This was mainly due to drop in the FX income. While fee & commission income recorded a 3.0% decrease YoY to close at PKR 4.5 Bn (Mar’22:PKR 4.7Bn), the FX income closed lower by 49.8% to close at PKR 1.1 Bn as against PKR 2.1 Bn for Mar’22 as the forex market remained more stabilised during the period under review. The Bank’s equity investment portfolio yielded dividend income of PKR 1.0 Bn, which is PKR 0.12 Bn or 13.1% higher YoY. Whereas, capital gains increased significantly by PKR 0.26 Bn or 264.1% to close at PKR 0.36 Bn (Mar’22:PKR 0.1 Bn). Going forward, the NFI is expected to rebound as the stock market is expected to show stability.
Operating expenses of the Bank for the period under review amounted to PKR 21.2 Bn which is 26.3% higher YoY as compared to PKR 16.8 Bn of SPLY. HR cost that constitutes around 67.7% of the total operating expenses, amounted to PKR 14.3 Bn against PKR 11.6 Bn in Mar’22. This increase reflects the impact of annual pay increase, charge for defined benefit plans and other HR related provisions. While property related expenses amounted to PKR 2.4 Bn (Mar’22:PKR 2.0 Bn), IT related expenses stood at PKR 1.2 Bn (Mar’22: PKR 0.6 Bn). The Bank is currently investing significantly to improve & strengthen its core banking applications and related IT infrastructure. Other operating expenses amounted to PKR 3.2 Bn depicting a 26.1% increase YoY responding to the general inflationary hike in costs. Overall, operating costs translate into a cost‐to‐income ratio at 52.9% which is in line with the inflationary pressures and industry norms.
For the three months period under review, provision charge amounted to PKR 0.68 Bn i.e. significantly lower by 36.0% or PKR 0.38 Bn as compared to PKR 1.1 Bn for the corresponding three months period of 2022. Key contributor towards this drop were the loans & advances that recorded a net reversal of PKR 68.4 Mn as against a charge of PKR 1.0 Bn for the corresponding 3M period of 2022. However, provision against diminution in value of investments recorded a YoY increase of PKR 710.0 Mn and amounted to PKR 724.5 Mn as against PKR 14.5 Mn in the comparative period. Specific and General provisions held against NPLs stood at PKR 204.5 Bn (Dec’22:PKR 190.7 Bn) and PKR 16.9 Bn (Dec’22:PKR 17.3 Bn), respectively. Thus, provision coverage at March 31, 2023 stood at 81.2%. However, excluding certain NPL that is secured through a sovereign guarantee issued by the Government of Pakistan, the NPL coverage stands at 93%.
Taxation charge for the period amounted to PKR 7.5 Bn as against PKR 6.2 Bn for Mar’22. Consequently, profit after‐tax for the three months period ended March 31, 2023 stood at PKR 10.7 Bn i.e. PKR 0.85 Bn or 8.7% higher than PKR 9.8 Bn for Mar’22. This translates into Earnings per Share of Rs. 5.02 as compared to Rs. 4.62 for Mar’22.
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