KARACHI, May 4: First quarterly results of 2006 of the banking industry showed that banks continued to move on the profitable path as listed banks earned a profit of about 58 per cent.

The listed banks had earned a profit of 99 per cent in 2005. Most of the earnings were interest-based as credit off-take by the private sector was moving with the previous year’s credit growth.

“Out of the 21 listed banks, 20 banks’ results showed a profit of 58 per cent to Rs14 billion, over the first quarter of 2005,” said Mohammad Imran, researcher at JS Research.

He said the high profits were because of high banking spread. The first quarter of 2005 witnessed a growth of 106 per cent, which means that the current profit growth is much lower than the previous year.

Of the Rs14 billion earnings, NBP was on top of the list with Rs3.6 billion followed by MCB Rs3 billion and United Bank Rs2.2 billion. Out of 20, five banks — Askari, Faysal, Bank Alfalah, NIB and Bank of Khyber — posted a decline in their profits during the first quarter of 2006, and only Crescent Commercial incurred losses.

Major contributor to the banks’ earning growth was improved net interest income (NII) in the outgoing quarter. The growth in NII was due to the rising yield on earning assets. During this quarter, banks’ advances increased by 2.1 per cent or Rs19bn only as compared to the advances growth of six per cent or Rs98bn in the corresponding period last year.

“This lesser growth in advances was, however, compensated by rising spread of the sector. The average spread of the sector for the first quarter of 2006 was recorded at 7.32 per cent, which was 223bps higher than average spread of the first quarter 2005,” said Mr Imran.

He disclosed that large banks’ profits were so huge that the profits growth of small banks was not more than 13 per cent in this quarter.

The first quarter results of 2006 show that major earning growth was witnessed in large commercial banks. In terms of deposits, four large listed banks (except Bank Alfalah), including NBP, UBL, MCB and ABL, posted a growth of over 100 per cent.

He said these banks had the advantage of their lower cost of deposits as compared to other banks in the industry.

“Excluding these large banks, the profitability growth of other banks was just 13 per cent in this quarter,” he said.