March 1, 2019 (MLN): Combined earnings of the domestic banking sector based on the financial performance of Pakistan’s top five banks, namely: HBL, UBL, MCB, ABL and NBP, verify that the sector’s performance during calendar year 2018 went through a rough patch.
The total net income within our sample sector has seemingly witnessed a contraction of 13% over the year, despite reasonable cut down in tax expenditures.
As can be seen in the table below, the sector as a whole encountered 13.7% growth in expenses while non-mark-up/interest income depleted by 3.6%. The major decline was observed in gain on sale of securities and dividend income.
The subdued performance is a result of higher pension costs and substantial provisioning due to concerns over international loan book and disappointing performance within the stock market.
|
Total earnings within Banking Sector for the year ended Dec 2018 ('000 Rupees) |
|||
|
|
Dec-18 |
Dec-17 |
% change |
|
Net mark-up/interest income |
280,940,573 |
269,907,026 |
4.09% |
|
Total non-mark-up/interest income |
114,158,011 |
118,374,247 |
-3.56% |
|
Total non-mark-up/interest expenses |
233,119,761 |
205,121,622 |
13.65% |
|
Profit before taxation |
128,890,933 |
158,277,010 |
-18.57% |
|
Taxation |
47,918,035 |
65,154,335 |
-26.45% |
|
Total profit after taxation |
80,972,898 |
93,122,675 |
-13.05% |
Based on individual evaluation, HBL outperformed the remaining four banks from the lot with considerable expansion in net gains, in both absolute terms as well as percentage wise. The bank marked an extension of around Rs.3.6 billion or 40.6% in net income.
However, HBL had paid a large sum in penalty payments to New York Department of Financial Services (NYDFS) last year, i.e. CY17. The fact that these payments were not applicable this year worked in favor of the Bank to portray an improvement in its overall performance. If we exclude this component from HBL’s financial statement, the bank’s bottom-line fell by 62%, YoY.
Rowing the boat in the same direction for HBL, a 55% cut in tax payments aided further in turning pre-tax profit declines into post-tax profit rise.
The table below shows that the among these banks, UBL’s performance was least satisfactory as the bank made over Rs.10 billion less in net profits this year.
|
Bank Name |
Net Income CY18 |
Net Income CY17 |
% Change, YoY |
|
HBL |
Rs.12.44 billion (EPS: Rs.8.22) |
Rs.8.85 billion (EPS: Rs.5.79) |
40.60% |
|
ABL |
Rs.13.03 billion (EPS: Rs.11.38) |
Rs.12.9 billion (EPS: Rs.11.12) |
0.82% |
|
MCB |
Rs.20.4 billion (EPS: Rs.17.17) |
Rs.22.05billion (EPS:Rs.19.13) |
-7.40% |
|
NBP |
Rs.20.04 billion (EPS: Rs.9.36) |
Rs.23.3 billion (EPS:Rs.10.9) |
-14.18% |
|
UBL |
Rs.15.05 billion (EPS: Rs.12.65) |
Rs.25.96 billion (EPS: Rs.21.2) |
-42.02% |
UBL’s earnings were wounded by hefty provisioning (CY18: PKR12.9bn) wherein most of the charge arose against its overseas loan book (mainly UAE).
Apart from this, Allied Bank Limited’s consolidated profits were merely 0.82% higher than last year. This mere change in bottom-line emanated from a similar not-so-great change in the company’s net interest income.
Despite a growth in the MCB’s net markup income and foreign exchange income by 10% and 113% respectively, the bank still failed to mark any significant improvement in terms of profitability. This was due to a counter increase in the bank’s interest expenses.
Lastly, National Bank of Pakistan (NBP) suffered 14% decline as provisions and write-offs for the period amounting to Rs.11 billion gave a major blow to the financial positon of the bank.
Having established that, the largest source of total gains in our sample sector is MCB followed closely by NBP with net incomes worth Rs.20.4 billion and Rs.20.04 billion during the year.
The market capitalization of this sample sector represents around 57% of the whole sector. Within this, the market capitalization of MCB takes the biggest share as of today, recorded at 17.3%.
Next in line is HBL at 13.52% followed by UBL at 11.69%.
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