KARACHI, Feb 25: Three private banks have pushed up their incomes considerably in the second half of 2001, mainly because of the enlargement of spread and a lowering of tax rate. Financial analysts doubt whether these banks would be able to maintain their income level next year.

Balance sheets of the three banks, that appeared to have benefited most from the State Bank’s decision to slash down by 4 percentage points the discount rate and cut down on T-bills rate of return plus the lowering of tax rate, are of the Muslim Commercial Bank (MCB), Bank Al Habib and Askari Bank.

The bank spread enlarged in the second half of the year 2001 because the State Bank of Pakistan slashed by four percentage point its discount rate and brought down rates on T-Bills. Earlier in July 2001, the budget offered the tax concession to the banks by bringing down rate from 58 per cent to 50 per cent.

Obviously, the depositors gained virtually nothing from the lowering of State Bank’s discount rates and on T-Bills rate of returns. The pay-off to depositors showed a marginal increase.

This enabled the Muslim Commercial Bank (MCB), a state entity privatized in 1993, to show a 14 per cent increase in income to Rs19.23 billion in second half of 2001 from Rs16.88 billion in corresponding period of 2000. This increase in the earning has enabled the MCB to declare a handsome 51 per cent increase in its net profit after tax to Rs1,108 million from Rs735 million in the year 2000. Net profit before tax is 59 per cent higher to Rs2.10 billion in 2001 from Rs1.32 billion in 2000.

In the second half of 2001, the MCB received Rs17.03 billion mark up income on its lending and investment registering a hefty 21 per cent increase over Rs14.12 billion in 2000. Profits paid to depositors showed an insignificant growth of 4 per cent to Rs9.48 billion from Rs7.24 billion.

Operating expenditure of the bank jumped by 15 per cent to Rs9.58 billion and contributed in the 10 per cent rise in total expenditure to Rs17.13 billion.

The MCB has declared a final cash dividend of 12.5 per cent in 2001 as against 10 per cent a year earlier.

Bank Al Habib has shown 27 per cent growth in its total income in the second half of 2001 amounting to Rs2.95 billion from Rs2.32 billion. It has announced a 61 per cent rise in after tax profit to Rs246 million in 2001 from Rs153 million in 2000.

Askari Bank showed a growth of 74 per cent in after tax profit. It declared Rs550 million profit after tax in 2001 as over Rs310 million profit in 2000.

“It is unlikely for this performance to be repeated next year, as we anticipate a squeeze in spread with declining lending rates,” says Taurus Securities Limited.

Reports emerging from the financial sector suggest that the banks have started responding to the moral suasion of the finance minister and the Governor of State Bank to bring down their lending rates.

The average weighted rate of the lending rates of all banks is reported to have been down by about one per cent. However, only the elite borrowers are the beneficiaries of this cut in lending rate. The depositors are yet to get any benefit.