Banks’ profit-before-tax climbs 42%

KARACHI: The annual profit-before-tax of banks climbed 42 per cent on a year on year (YoY) basis in the calendar year, while the pre-tax-profit before provisioning went up 50 per cent YoY, according to analysts at Topline Securities.

Pakistan’s listed banks profitability (PAT) increased 15 per cent YoY to Rs307 billion in 2022. Despite record high interest rates, a slowdown in the profit growth is primarily due to higher provisions and taxations.

In dollar terms, the listed banks profit-after-tax fell 8 per cent YoY to $1.5 billion, while the profit-before-tax went up 13 per cent YoY to $3.1 billion.

The net interest income (NII) of the sector clocked-in at Rs1.1 trillion in 2022 against Rs758 billion in 2021, as the average policy rates during 2022 clocked-in at 13.52 per cent against 7.42 per cent in 2021.

The non-interest income of the sector improved 27 per cent to Rs307 billion driven by growth in the foreign exchange income.

Besides, the non-markup expenses also jumped 27 per cent to Rs658 billion due to higher administrative expenses.

The provision expense clocked-in at Rs69 billion in 2022, up 3x from Rs22 billion recorded in 2021, primarily on the back of the Eurobond re-pricing as per the IFRS-9.

The tax expense of the sector increased 81 per cent YoY to Rs334 billion in 2022 from Rs185 billion in 2021, where effective tax rate clocked-in at 52 per cent in 2022 against 41 per cent in 2021.

To recall, in the federal budget, the government increased the tax rate from 39 per cent to 49 per cent, including super tax along with the higher tax on low advance-to-deposit ratio.

In terms of NII growth, all the banks reported growth except for the Summit Bank Limited (SMBL), whereas BankIslami Pakistan Limited (BIPL), Meezan Bank Limited (MEBL), Standard Chartered Bank of Pakistan Limited (SCBPL), and the Bank Alfalah Limited (BAFL) reported highest growth of 67 to 86 per cent.

In 2022, BIPL and MEBL reported highest earnings growth of 128 per cent and 59 per cent, respectively.

Besides, SMBL and Samba Bank Limited (SBL) reported the loss of Rs3.2 billion and Rs428 million, respectively, while the Soneri Bank Limited (SNBL) and the Bank of Punjab (BoP) reported 34 per cent and 14 per cent, respectively, decline in their earnings in 2022.

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