Commercial banks’ profits up 47% YoY in 2014: Earnings growth for Pakistan’s Commercial Banks in 2014 clocked in at 47% YoY, with profitability reaching Rs158.22bn in 2014 vis-à-vis Rs107.83bn in 2013 and ROE clocking in at an 8-year high of 15.71%. However, earnings growth was largely skewed towards National Bank of Pakistan (NBP) and Askari Bank (AKBL) as both these banks booked hefty provisions in 2013.

On top of that, Net Interest Income (NII) grew by 24% YoY as high yielding assets outgrew liabilities during 2014. Scheduled banks investments in Pakistan Investment Bonds (PIBs) touched record a high of Rs2,659bn, 3.57x higher compared to investments in Dec 2013. Hence, NIMs expanded to 3.93% in 2014 from 3.52% in 2013. Other major contribution to earnings growth came from NonInterest Income which increased by 20% YoY, where fee and other income collectively jumped by 21% YoY. On the other hand, administrative expenses edged up by 14% YoY, whereas provisions declined by 32% YoY. Resultantly, cost to income ratio improved by 418bps to 52.37%.

Investments take asset base up by 15% YoY: Banking sector’s deposit growth clocked in at 11% YoY in 2014, led by 20% YoY growth in deposits of Islamic banks as conventional banks focused on shredding fixed deposits. Overall asset base of the sector expanded by 15% YoY on the back of 23% YoY higher investments, though Islamic investments recorded a decline of 20% YoY. Advances growth clocked in at 10% YoY, however fresh lending was largely limited to short-term liquidity requirements. Outstanding NPLs increased by 3% YoY to Rs572bn in 2014 from Rs553bn in 2013, with coverage ratio improving by 152bps YoY to 80.88%.

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