KARACHI: Combined pre-tax earnings of banks dropped four per cent year-on-year to Rs82.3 billion in the second quarter of 2016, though a decline in effective tax rate helped the sector post an 8pc increase in its after-tax profit.

Effective tax rate in the April-June quarter was 49pc as against 54pc in the same quarter of the last year, according to a report issued by Topline Research on Wednesday. The fall in pre-tax profit was mainly driven by 14pc decline in non-interest income and 8pc uptick in expenses, the report said.

Non-interest income dropped as capital gains during the quarter remained on lower side.

In April-June 2015, banks realised above-average capital gains of Rs22.5bn thanks to their increased participation in Pakistan Investment Bonds. The gains came down to Rs14.3bn in April-June 2016 as interest rates have likely bottomed out.

“We believe that this number could come down further and start normalising, as a major chunk of PIBs matures from the third quarter of 2016,” the report said.

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