Banking Soaring growth Despite low Interest Rates

By: WE Research

With the support of increased net interest income (NII) and non-interest income, the banking sector posted an notable growth of 25% YoY in 9MCY15 as its profit after taxation (PAT) reached Rs 136,417 million versus a PAT of Rs 108,930 million in 9MCY14.

We have taken 20 listed commercial banks in consideration which have announced their corporate results. The profitability of the sector however was affected by significant rise in provisions and higher effective taxation mainly due to imposition of 4% Super Tax. The effective taxation of the sector increased to 40.9% in 9MCY15 versus 34.3% in 9MCY14.

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Impressive rise in net interest income: Primarily on back of higher investments in Pakistan Investment Bonds (PIBs), increased earning assets and transformed deposit mix, the net interest income of the banking sector grew by 25% YoY in 9MCY15 to Rs 331,308 million as against Rs 265,411 million in 9MCY14.

The interest income of the sector reached Rs 677,539 million during the period under review resulting in a 10% YoY growth when compared to an interest income of Rs 613,516 million in 9MCY14. On the other side, the interest expenses of the sector reduced by 1% YoY in 9MCY15 to Rs 346,231 million versus Rs 348,105 million in the identical period in CY14.

Non-interest income elevates 37% YoY: The bottom-line of the sector took a heavy boost from 37% YoY rise in non-interest income to Rs 150,457 million in 9MCY15 as against Rs 109,830 million in 9MCY14. However the profitability of the sector was affected by 262% YoY surge in provisions to Rs 27,934 million in 9MCY15.