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National Bank of Pakistan

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Highlights - Corporate News

National Bank of Pakistan (NBP) is the largest commercial bank in Pakistan with total asset size of Rs 1,014 billion as on 30th September 2011 accounting for nearly 14 percent of the industry's (all commercial banks) total asset base.

NBP has one of the largest branch networks with 1,266 domestic branches and 23 overseas branches.

Out of its country-wide network, NBP has converted its 1,000 branches online.

Profitability On the back of lukewarm growth in operating revenue that was offset by a higher provisioning cost and administrative expenses, NBP's net profit remained unchanged at Rs 11.4 billion in 9MCY11 over the same period of a year earlier.

The EPS stood at Rs 6.78 in 9MCY11.While the other four largest banks-MCB, UBL, ABL and HBL-cumulatively registered 29 percent growth in bottom line during the period under review.

Mark-up revenues The bank's top-line growth stayed tepid, inched up by 5 percent, year on year, to Rs 69.4 billion in 9MCY11.This is down to 2 percent decline in the bank's asset base during the first nine months of CY11 to Rs 1,014 billion as on 30th September 2011 when the industry's asset base expanded by 9 percent to Rs 7,233 billion.

Following against the tide, the banks advances increased by 7 percent during the first nine months of the current year to Rs 513 billion at the end of September when the industry's (all commercial banks) advances base fell by 4 percent.

While, NBP saw its investments base drop by 16 percent as opposed to 31 percent growth in the industry's investment portfolio.Hence, the bank's Advances to deposit ratio (ADR) increased by 64 percent at the end of September marking a jump of 7 percentage points during the first nine months of CY11.

At this level the bank's ADR is cut above the group of top five banks with the group's average ADR at 57 percent.Mark-up expenses In light of 4 percent drop in the bank's deposit base during the first nine months of CY11 to Rs 798 billion at the end of September, NBP's mark-up expenses grew marginally by 6 percent, year on year, to Rs 36 billion in 9MCY11.NBP lost its position by a whisker, as the largest bank by deposit size to HBL since HBL's deposit base stood at around Rs 802 billion as of September 30, 2011.NBP's CASA ratio eased down to 62 percent as on 30th September 2011, down by 115 bps compared to CY10.

The bank's CASA ratio is the lowest among the group of top five banks

.Net interest income The bank clocked in a net interest income of Rs 33 billion in 9MCY11.

Net Interest Income (NII) growth of a paltry 5 percent reported by NBP pales in comparison to other four giant commercial banks as their combined NII rose by 18 percent, year on year in 9MCY11.NBP is hard put to increase its margins as its gross spread ratio remained unchanged at 48 percent in 9MCY11 over the same period of a year ago.

The bank's gross spared ratio is lowest among the group of top five banks, with group's average gross spread ratio at 55 percent.

Non mark-up income and non-mark-up expenses Aided by higher dividend income, income from dealing in foreign currencies and other income, the bank's non mark-up income improved by 16 percent, year on year, to Rs 13 billion in 9MCY11.

At this level, non mark-up income accounted for nearly 28 percent of the bank's operating revenues.Non mark-up expenses registered a growth of 14 percent, year on year, to Rs 22 billion in 9MCY11.

Given a high inflationary environment, a 14 percent jump in administrative expenses sounds reasonable.

However, the bank's domestic branches network stayed constant at 1,266 branches during the period under review.Since net interest income grew marginally, the bank's operating revenues to expenses ratio inched down to 2.07 in 9MCY11 from 2.18 in the corresponding period of a year earlier-a notch below the top five banks average of 2.4.

Non-performing loans NBP's asset quality deteriorated significantly, as toxic loans on its books increased by a whopping 36 percent during the first nine months of CY11 to Rs 118 billion as on 30th September 2011.That lifted the bank's infection ratio by around 4 percentage points to 20 percent as on 30th September 2011.

This is sharply higher compared to the other four giant banks average infection ratio of around 12 percent.

The bank's coverage ratio also took a knock; fell by 14 percentage points to 56 percent, as opposed to the other four large banks average coverage ratio of 80 percent.

Outlook Being one of the largest public banks of the country, the market expects NBP to tower head and shoulders above the industry.

But, even a cursory glance at its financial performance over the past few years suggests that the bank will likely lose ground to relatively smaller players, who are aggressively eyeing expansion and focusing on low-cost service delivery channels.

Courtesy: Business Recorder

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