KARACHI: The combined profit of big five banks — ABL, HBL, MCB Bank, NBP and UBL — rose by 31 per cent in 2014 thanks to improved margins and growth in earnings assets.

Topline Securities in its report on Friday said lower provisioning expense, led by sharp decline in NBP provisioning, resulted in higher profitability of these banks. The total profitability of these banks stood at Rs111.3bn in 2014 against Rs84.7bn in 2013. Led by NBP’s abnormal provisioning expense and ABL’s lower tax rate, the profit of these banks recorded 6 per cent fall in 2013 over the preceding year.

Bank’s strategy to shift into high yielding long-term Pakistan Investment Bonds (PIBs) from short-term Treasury Bills (T-Bills) resulted into improved margins. Yields on three-year PIBs offered an average 11.8pc in 2014 as compared to 9.9pc in 2013. Till September 2014, these banks had invested Rs1,275bn in PIBs, which is 27 per cent of their combined deposits.

This ratio at the end of 2013 stood at 9pc since investment in PIBs stood at Rs385bn. “A significant shift in asset mix by banks led to strong growth in core income and profitability,” said the report.

The big banks have a combined market share of 58pc in industry’s total deposits, as of Sept 30, 2014, while they cover 72pc of banking sector market capitalisation.

Published in Dawn, February 28th, 2015

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