KARACHI: Profits of banks and energy firms involved in exploration and production (E&P) increased by more than two-thirds in 2022-23, an analysis of listed companies conducted by Topline Securities showed on Thursday.

Overall, the total after-tax income generated by 87 of the 100 companies constituting the benchmark index of the Pakistan Stock Exchange (PSX) amounted to Rs1.2 trillion in 2022-23, up 16 per cent from a year ago when the pace of bottom line expansion was 23pc.

However, a large chunk of this profit growth originated from banks and E&Ps as their earnings rose 68pc and 69pc, respectively, on a year-on-year basis. Excluding these two sectors, the index’s profitability declined 32pc.

The profitability numbers appear worse in dollar terms. The combined net income of the representative companies of the PSX dropped 17pc year-on-year to $4.9 billion versus an increase of 11pc recorded in 2021-22. The drop in dollar-denominated profits in the latest fiscal year becomes even more pronounced (-51pc) after excluding banks and E&Ps from the sample.

According to analyst Sunny Kumar, banks’ collective earnings of Rs421bn were driven by their net interest income, which shot up in 2022-23 because of an all-time high policy rate maintained by the central bank.

Similarly, unusually high E&P profits (Rs415bn) were a direct result of a significant devaluation given that the revenues of energy firms are linked to the dollar rate.

Sectors that slowed down the overall earnings growth were oil marketing, power and auto as their incomes dropped 88pc, 90pc and 94pc, respectively. As for sales recorded by the KSE-100 index companies in 2022-23, the collective top line surged 34pc even though gross margins took a dip to 21pc from 23pc a year before.

Major listed companies announced cash dividends in 2022-23 amounting to Rs501bn, up 25pc year-on-year. This translates to 42pc dividend pay-outs in 2022-23 versus 39pc in the preceding year.

“Higher dividend signals adequate liquidity with listed firms along with limited opportunities of investment that can generate required returns,” said Mr Kumar.

Published in Dawn, September 29th, 2023