Bank of Punjab March 26, 2014 RECORDER REPORT 0 CommentsE-mailPrintPDF Bank of Punjab was established under the Bank of Punjab Act 1989. The bank got the status of scheduled bank by the SBP in 1994. Currently, with its network of 334 branches, BoP has its presence in all the major cities in Pakistan. In 2013, the bank initiated its Islamic banking operations which currently include 7 branches. Government of Punjab is the major shareholder of BoP with a stake of 52.67 percent. The bank is also listed on all the three stock exchanges of the country. Punjab Modaraba Services (Private) Limited is a fully owned subsidiary of the Bank and is mainly engaged in floating and managing modarabas. FINANCIAL PERFORMANCE, CY 2013 During 2013, BoPs advances grew nominally by 5 percent year on year; however, drop in the investments during the year eked out a negligible earning asset growth of 1 percent year on year. The insignificant asset growth couldnt sustain the top line amid monetary easing. However, what is worth admiration is the tremendous drop in mark-up expenses despite healthy deposit growth of 15 percent year on year. This is because the deposit growth primarily came on the heels of current accounts which swelled by 27 percent year on year. While fixed and saving deposits also grew but their proportion in the total deposits slid down. Lower mark-up expenses culminated into an 88 percent year-on-year growth in the net interest margin in CY13. Resultantly, the spread ratio clocked in at 17 percent in CY13 versus 9 percent in CY12. This, although is a commendable improvement over the year; however, it is still far below the industry average of 38 percent. Since CY11, BoPs Non-Performing Loans (NPLs) have been ticking down which could be the reason why the bank has been booking reversals against NPLs since 2011. However, the pace of booking reversals has been lowered over the years as the benefit of Forced Sale Value (FSV) availed by the bank in the earlier years has been reduced. During CY13, the bank booked 13 percent lower provisions than it booked in CY12. However, a 14 percent year-on-year drop in the NPLs resulted in a coverage ratio of 43 percent in CY13 vis-à-vis 38 percent in CY12. Infection ratio also came down to 38 percent in CY13 from 46 percent in CY12. It should be noted that Federal and provincial government is the second largest borrower of BoP (after Textile sector). Such advances are to subject to government undertaking and hence require no additional provisioning. This could be the reason why BoPs coverage ratio is very less when compared to other banks. The non-mark-up income grew by 13 percent year on year during the period owing to higher net profit on sale of non-banking assets acquired in satisfaction of claims, higher loan processing charges, ATM transaction charges, etc. The bank opened 28 new branches during CY13 including 7 Islamic branches, the result of which was a 16 percent higher non-mark-up expense incurred by the bank during the year. The bottom line posted a 10 percent year-on-year growth in CY13 translating into a profit of Rs 1.9 billion. The EPS has dropped by 17 percent year on year in CY13 as the bank conducted two right issues of Rs 5 billion each during CY13 to meet its capital requirements as prescribed by the SBP. The Banks capital adequacy ratio on group level as at December 31, 2013, on Base-lII is 8.95 percent as against the prescribed level of 10 percent. FINANCIAL PERFORMANCE, CY12 With a momentous year-on-year growth in its asset portfolio in CY12, BoP was able to grow its top line by 19 percent year on year in CY12. This appears to be a commendable achievement amid top lines of other banks were grappling against the rate-cuts. Besides, CY12 was the year when the bank witnessed positive net interest margin which was unseen since CY08. Thanks to BoPs increased focus towards low-cost deposits (CASA). NPLs dipped by 6 percent year on year; however, the bank booked lower provisioning because of lower FSV. Non-mark-up income boasted a marvellous growth of 60 percent year on year mainly on account of gain on sale of securities. Tax benefit from previous years also augured well for the bottom line which multiplied by over five times in CY12. The bank expanded its network by adding 22 new branches during the year. FUTURE OUTLOOK While the bank has increasingly been making profits since CY11, its performance on the KSE is getting worse as the share price is drifting away from KSE-100. Weak fundamentals might be the reason why investors are wary of this profit-making entity. An infection ratio of 38 percent and a spread ratio of 17 percent against the industry average of 16 percent and 38 percent, respectively, seem quite unpleasant. While the fundamentals are improving over time, one has to see that the primary bottom line savior for BoP is massive reversal against the bad debts. However, due to reduction in the FSV benefit, reversals are shrinking. The bank has to work rigorously to improve its spreads to avoid negative bottom line amid the bank is on an aggressive expansion drive whereby it has added 50 branches to its network since CY12. Current account showing high growth figures is an encouraging sign.
Posted on: Wed, 26 Mar 2014 02:04:22 +0000
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