Karachi October 31 2021: SBP earned a profit of PKR 760,859 million (consolidated) in FY21 as compared to a profit of PKR1,163,433 million in FY20.
The decline in profit is primarily attributed to lower income from lending to the government.
Pakistan Investment Bonds (PIBs) worth PKR 569,000 million matured during the year and no fresh lending was made by the Bank to the Federal Government, resulting in lower income under this head.
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Moreover, decrease in average interest rate during FY21 also impacted adversely on income from lending to Government. Income from reverse repo transactions and foreign currency deposits also witnessed a decline while charge on account of fair value adjustment on COVID loans significantly increased during the year. The decline in income from these major income/expense streams is partly offset by decrease in interest / mark up expense and operating expenses. SBP group also earned higher net exchange gain during FY21 as compared to the previous year due to appreciation of PKR against other currencies particularly USD during the year.
The interest / markup income decreased by Rs. 453,033 million to Rs. 755,588 million, registering a decrease of 37 percent. For SBP, lending to the Government of Pakistan (GoP) remained the major source of income during the year, which dropped by 39 percent due to maturity of PIBs worth Rs. 569 billion and no further lending to the GoP during the year. Income under this head also declined due to decrease in average interest rate on PIBs during the year. The income earned on lending to commercial banks through OMO injections decreased by 30 percent due to decline in average interest rate despite larger volumes of monetary injections during the year.
The interest earned on refinance facilities to priority sectors increased to Rs. 17,892 million in FY21 from Rs. 12,837 million in FY20 primarily due to increase in lending to banks under various refinance schemes.
The income on FCY deposits registered 59 percent decrease during the year. Although foreign currency placements increased during the year, however, the return on investments decreased due to lower interest rates in the international market.
On the expenditure side, the Bank incurred interest/ markup expense on FCY and domestic liabilities. FCY liabilities include deposits of international organizations and central banks, borrowings from International Monetary Fund and currency swap arrangements. The domestic interest/markup bearing liabilities include repurchase transactions and sukuks purchased under Baimuajjal agreement. The interest/ markup expense witnessed a decline of Rs. 20,651 million primarily due to decrease in expense on deposits held by the Bank, expense on sukuks purchased under bai-muajjal agreements and interest on SDR of IMF.
The exchange gains/ (losses) arise on FCY assets and liabilities of the Bank. A major part of the foreign currency assets of the Bank are USD denominated whereas the foreign currency liability exposure is mainly SDR and USD denominated. Accordingly, the movement in the PKR/SDR and PKR/USD exchange rates directly affects the exchange rate account.
The bank earned a net exchange gain of PKR 135,328 million during FY21 compared to an exchange gain of PKR 66,402 million during FY20. There is a net FCY liability position (including off balance sheet commitments) that resulted in net exchange gain as PKR appreciated against USD, SDR and other currencies during the period.