Banking sector profit up 20 percent in first half Current Year 2011

Karachi: The banking sector profit surged by 20 percent to Rs47.4 billion during the first half of 2011 against Rs39.3 billion in the corresponding period last year, a report of JS Research revealed on Monday.

The profit is driven by higher net interest income (NII) and non-interest income (on account of higher fee income), according to JS Research report.

The analysis comprises 19 of the 24 banks listed at the local bourse and accounts for 99 percent of the banking sector’s market capitalisation.

The net interest income grew by 20 percent year-on-year (Y-o-Y) on higher KIBOR to Rs151.4 billion. The report said that the jump was primarily due to robust growth in earning assets, especially investments, higher KIBOR and strong spreads.

Investments for the entire sector had seen a growth of 20 percent in 1H2011, which supported the growth in net interest income, while average spreads remained higher by 25 basis points.

The State Bank of Pakistan’s (SBP) tightening stance during the second half of 2010 and keeping it unchanged during the following quarter, kept average KIBOR up by 140bps Y-o-Y to 13.73 percent in the first half of 2011.

Among the top- and mid-tier banks, MCB Bank, Habib Bank Limited (HBL), Allied Bank Limited (ABL) and Faysal Bank Limited (FABL) recorded impressive double-digit growths of 26 percent, 19 percent, 17 percent and 67 percent, respectively.

The research report prepared by JS Global said that the non-fund income also grew by 17 percent to Rs48 billion as fee income, due to increased commission from remittances and trade business, rose by nine percent to Rs22 billion.

Loan losses of the banking sector soared by 24 percent Y-o-Y during the period under review on account of new accretions and a downward shift of older non-performing loans (NPLs).

Inflationary pressures saw administrative expenses surging by 17 percent Y-o-Y to Rs92.7 billion during the first half of 2011.

The Top-5 banks continued to dominate, accounting for 80 percent of the cumulative profits during the period.

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