KARACHI-The Board of Directors of National Bank of Pakistan met Tuesday to approve the annual financial statements for the year ended December 31, 2022.
The bank has again delivered strong financial results, and posted a pre-tax profit of Rs62.7b, depicting an annual increase of 18.7%. With strong income momentum across its businesses segments, the bank’s fund-based net interest income was particularly strong. The 40% growth in average earning assets, coupled with margin expansion through higher policy rates, generated gross interest income of Rs 503.3b i.e. 117% higher than Rs231.9b for 2021. Pursuant to an effective fund mobilisation, average interest bearing liabilities of the bank reached Rs 3,871.9b (2021:Rs 2,692.9b). Consequently, in the backdrop of higher average interest rate, the bank’s cost of funds amounted to Rs 386.5b.Accordingly, net interest income for the year closed at Rs116.8b, depicting a YoY increase of 19.7%.
Despite a challenging business environment and lower trade activity, the bank maintained its non-fund income stream that amounted to Rs36.7b (2021: Rs36.9b). Equity investments of the bank generated dividend income of Rs5.2b, 13.3% higher YoY. Fee & commission income earned through banking operations amounted to Rs 21.2b i.e.18.8% higher YoY. As the bank provides FX solutions to a large number of corporates, its forex income for the year amounted to Rs 7.4b which is 14.4% higher YoY. However, due to a lacklustre performance of the stock market, the bank could generate capital gains of Rs 1.1b as compared to Rs 6.2b last year. Consequently, total income for the year amounted to Rs 153.5b, i.e. Rs 18.95b or 14.1% higher, YoY. Reflecting the inflationary impacts, ad hoc allowance allowed to the employees and the bank’s investment into its IT systems and upgrade of business premises, operating expenses for the year amounted to Rs 78.2b(2021:Rs60.0 b). A provision charge of Rs12.6b was created during the year. This is particularly important in the backdrop that IFRS 9 stands implemented effective January 01, 2023. As the Bank held Rs 190.7b in specific provisions against NPL of Rs 205.3b,depicting a high coverage ratio at 93%.
Accordingly, the bank’s pre-tax profit for the year amounted to Rs 62.7b i.e. 18.7% up against Rs 52.9b for the prior year. As a result of retrospective taxation and increase of 10% in the income tax rates for banks (from 39% to 49%), tax charge amounted to Rs 32.3b, translating into an effective tax rate of 51.5% as compared to 47.0% for the year 2021. Resultantly, profit after tax for the year amounted to Rs30.4b i.e. 8.6% higher than Rs 28.0b for 2021. This year, the bank achieved Rs 5 trillion milestone in its balance sheet that grew by 36.2% to reach Rs 5,240.4b from Rs 3,846.7b at the end of 2021. This makes NBP the largest bank in Pakistan in terms of total assets. While investment (net) increased by 79.4% to reach Rs 3,477.4b, gross advances recorded 10.2% growth to reach Rs1,438.6b.
With this growth, the bank’s advances-to-deposits ratio improved to 54% as compared to 43% at the end of 2021. At the year end, total deposits amounted to Rs 2,666.2b as compared to Rs 3,019.2b at the end of 2021. This drop in deposits is based on the bank’s focussed strategy to reduce high cost deposits so as to deliver higher after-tax profit to its shareholders. Major share of the bank’s deposits comes from sticky customer deposits that contribute 98.1% of the total deposits. With current deposits amounting to Rs 1,310.2b or 49.1% of the total deposits, the bank maintains a strong liquidity profile. While CASA ratio stood at 79.4%, Liquidity Coverage and Net Stable Funding also remained high at 195% and 251%, respectively. While shareholders’ net assets increased by 5.1% YoY to Rs 300.8b, capital adequacy ratio improved by 120bps to 21.59% from 20.39% at YE’21.