October 31, 2007	Wednesday	Shawwal 18, 1428

KARACHI, Oct 30: The profit of the banking industry continued to rise during the first nine months of the current calendar year proving it the most vibrant sector of the economy.

The financial results of all listed commercial banks for January-September 2007, excluding National Bank, showed a 15 per cent growth in overall profit. The State Bank in its annual report said the banking sector played key role in services sector which reached over 53 per cent of Gross Domestic Product (GDP).

“The combined profit of 22 listed commercial banks reached to Rs52.9bn during the period under review as compared to Rs45.98 billion over the corresponding period of 2006, showing a double digit growth of 15 per cent,” said Mohammad Imran, head of research at First Capital Equities.

He was of the view that the banking sector would continue to dominate the services sector.He said the total profit would further increase after NBP, the largest bank of the country, announced its financial result which was currently making preparations to launch its Global Depository Receipts (GDR) in the United Kingdom. The results of KASB were also not announced.

During the nine months of 2007, the cumulative net interest income (NII) of the listed banks was recorded at Rs108 billion, showing a growth of 12 per cent. The relatively lower growth is mainly attributable to the higher base effect.

A significant change was noted in advances which showed a decline of two per cent during the period under review as against nine per cent increase in the corresponding period last year.

Bankers attributed the fall in advances to higher interest rates due to tight monetary policy being pursued by the State Bank to check rising inflationary pressures.

The industrial sector had also been complaining about high lending rates but Governor SBP Dr Shamshad had said on Monday that the low inflationary environment was conducive for the economy and the higher interest rates helped to cut the credit demand.

The deposits growth (due to above average M2 growth) was recorded at 15 per cent against 6 per cent of the previous year. Due to this the cost of funds increased which restricted the growth in NII.

Interest earned ratio had also increased to 48 per cent in the nine months against 44 per cent in the corresponding period last year. Non interest income witnessed an impressive growth of 39 per cent to Rs45bn. Major growth was witnessed in the capital gain head.

“Banks took advantage of bullish market trend and booked heavy capital gains,” said Imran.

During the period under review, the provisions against non-performing loans increased by 37 per cent to Rs8.6 billion.