KARACHI, Feb 14: After three years of booming record profits, two large privatised banks’ profits fell sharply for the year 2007.

However, banks and analysts believe that the boom is not over and post-elections scenario would again give a boost to the banking business.

One of the largest banks, Habib Bank, announced a fall of 33 per cent in the profit. The bank posted unconsolidated earnings of Rs8 billion as compared to Rs12 billion in 2006.

The fifth largest United Bank (UBL) also reported a decline of 11.3 per cent to bring the profit at Rs8.4 billion against Rs9.5 billion it eanred the previous year.

“The decline was mainly due to one time provisioning, which was carried out by all banks in accordance with the State Bank instructions,” said Mohammad Suhail, director Brokering at JS Company.

Habib Bank in 2007 booked Rs7.7 billion as provisions, which were up by a massive 165 per cent from Rs2.9 billion recorded in 2006.

“HBL, along with the results, also announced Rs4 per share cash dividend with 10 per cent bonus shares,” said Atif Malik, a sernior analyst.

In 2007, net interest income of HBL was recorded at Rs30.3 billion which was up just by 2 per cent as against Rs29.6 billion recorded in 2006.

Atif said it was also because of increased mark-up or interest paid to the depositors. Non-interest income of the bank, similarly, depicted low growth as it increased by just 4 per cent in 2007 and stood at around Rs8 billion.

However, the operating expenses of the bank stood at Rs17.4 billion, which was up by 7 per cent from those recorded in 2006.

The story of UBL is not different as the bank also made heavy provisioning, which impacted upon its profitability.

The bank posted earnings of Rs8.4 billion as compared to Rs9.5 billion in 2006, which is a decline of 11 per cent. This was again mainly on account of one-time provisioning required to be done by all banks in 2007.

United Bank in 2007 booked Rs6.4 billion as provisions, which were up by a massive 177 per cent from Rs2.3 billion recorded in 2006.

In 2007, net interest income of UBLwas recorded at Rs24.1 billion, which was up by 16 per cent versus Rs20.9 billion in 2006. This was due to higher interest margins and growth in the loan book portfolio of the bank. While non-interest income of the bank depicted a 29 per cent growth to around Rs9 billion mainly on the back of rising trade based activities, investment banking activities and increasing share of consumer financing of the bank.

Operating expenses of the bank stood at Rs13.7 billion, which was up by 22 per cent from those recorded in 2006.

Analysts said that other banks would also come out with the same results as one time provisioning was the real dent in the profits of all banks.

The State Bank’s recent initiative to increase the discount rate by 50 basis points will help the banks to book more profits as interest income. The SBP increased the interest rate from February 2008. Bankers said it would certainly increase the lending rate and bring more interest income for the banks.

“Since the one time provisioning is now over, banks will show much better profits for the year 2008,” said a banker. He also said that the credit flows would icnrease after the elections as uncertainty before the polls curtailed the credit flows to private sector.