KARACHI: Bank’s earnings fell four percent to Rs44.5 billion in the third quarter of current financial year of 2016 as lower net interest income caused by bulk maturity of the government long term securities took tool on their income, a brokerage report said on Friday.       

The net interest income (NII) of banks declined four percent to Rs108 billion in July-September 2016 quarter as major chunk of high yielding long-term Pakistan Investment Bonds (30pc of total outstanding PIBs or Rs1.2 trillion) retired in July 2016.

“Banks had booked high yielding bonds at 12 percent during 2013 and 2014 which have now been retired,” analyst Umair Naseer at Topline Securities said in the report. “Yields on these bonds have now come down six percent since then. This has led to pressure to NII.”

The dip in NII was somewhat been compensated by volumetric sector deposit growth that has grown by 13 percent year-on-year to Rs10.6 trillion in September this year.

Naseer said along with lower NII, non-interest expense increased by seven percent to Rs84 billion, which also restricted banking profitability. “However, growth in non-interest expense remained lower as compared to historical average and expectations as banks took cost control measures in an environment when NII is under pressure,” he added.

The NII of banks also declined to Rs43 billion mainly due to high base effect as bank had booked high capital gains of Rs14 billion in July-September 2016, which fell to Rs13 billion during the same quarter. Income from dealing in foreign currency also remained on lower side due to stable exchange rate leading to lower non-interest income.

Naseer said banks booked provision reversals of Rs2 billion (higher than expectations) as compared to provisioning expense of Rs6 billion in the same period last year. “This was triggered by recoveries of non-performing loans and lower provisions against investments,” he added.


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