By: Azee Securities (Pvt.) Ltd
Earning of Pakistan’s banking sector has remained strong during the nine month of 2014 as it profitability increased by 39%. Our sample includes 22 commercial listed banks which have announced their results representing 97% of market capitalization.
Robust growth in earnings seen
Banking sector earning growth continues and registered significant growth of 39.2% in 9MCY14, exhibiting bottom-line of Rs 109.54 billion as against Rs 78.69 billion in 9MCY13. The main features for growth in earning remained 1) 20.2% rise in net interest income, 2) 68% decrease in provisions due to lower growth in fresh NPLs and reversals and 3) 16% rise in non interest income. However, profitability decline by 2% QoQ to Rs 38.40 billion in 3QCY14 against Rs 39.19 billion in 2QCY14 due to decline in non funded income by 8.3% QoQ owing to limited capital gains
Major boost by higher net interest income
Banking sector net interest income surge by 20.2% to Rs 269.42 billion against Rs 224.17 billion in 9MCY13 mainly due to change in deposit mix and rise in earning assets. Interest income increased by 16.4% to Rs 622.96 billion versus Rs 535.25 billion in 9MCY13 mainly due to investments in PIBs. Interest expense too hike by 13.6% to Rs 353.53 billion in 9MCY14 compared to Rs 311.08 billion in 9MCY13 due to increase in minimum benchmark rate.