KARACHI: The July-September quarter brought to the country’s banking industry the highest-ever three-month profits, a review of earnings data of 16 commercial banks showed on Wednesday.

According to Shameer Alam Zaidi, analyst at Ismail Iqbal Securities Ltd, bank earnings clocked in at Rs85 billion in July-September, up 26 per cent from a year ago.

Major drivers for the record-high earnings were higher interest rates and healthy fees and foreign exchange income.

“Provisions have increased but (they’re) still on the lower side, especially on loan portfolios… banks have so far remained largely unscathed from the Covid-19 and interest rate shocks,” he said.

The only spoiler has been a change in the tax regime, which has led to an effective tax rate of 52pc versus 41pc a year ago.

Net interest income of the sample banks increased 17pc in July-September on a quarterly basis owing to the lagged impact of the asset repricing. On the individual bank level, Standard Chartered Bank Ltd (42pc), Habib Metropolitan Bank Ltd (35pc), Askari Bank Ltd (34.9pc), Meezan Bank Ltd (32.2pc) and BankIslami Pakistan Ltd (25pc) were top performers while the Bank of Punjab Ltd (-9.5pc) and National Bank of Pakistan Ltd (0.7pc) remained underperformers.

Sector-wide, non-markup income declined 5pc quarter-on-quarter mainly because of a slight decrease in both fees and foreign exchange income. “Despite the expectation of significant normalisation, foreign exchange income remained robust and showed only a slight decline of 2.7pc quarter-on-quarter,” he said.

Deposits of the banking industry grew 15pc year-on-year while the assets-to-deposits ratio (ADR) improved to 48.6pc from 47.7pc in June and 46.9pc in the year-ago period. Habib Bank Ltd shed 10pc of its deposits on a quarterly basis, which took its ADR to over 50pc.

On the other hand, United Bank Ltd increased its deposits by 9.5pc from the preceding quarter, which pushed its ADR below 40pc and resulted in the effective taxation rate of 59pc.

“Though a majority of assets and deposits have been repriced, we still expect net interest income to improve further as the asset repricing from the hike of 125 basis points in July is yet to kick in. The provisions might see some uptick as the impact of the economic slowdown will be more evident in coming quarters,” said Mr Zaidi.

Published in Dawn, November 3rd, 2022