KARACHI, May 4: Faysal Bank Ltd. that now represents an entity comprising Faysal Bank Ltd. and Al-Faysal Investment Bank Ltd. (AFIBL) posted a pre-tax review of Rs252.86 million in the first quarter of this year.

After the AFIBL was amalgamated with Faysal Bank on January 1, 2002 the accounts of the two institutions were combined and the bank has recently published the first ever financial statement in its new capacity. The statement that covers January-March 2002 shows that the amalgamated bank earned Rs252.86 million pre-tax profit up 10.7 per cent from around Rs228.4 million earned during 2001.

An analysis of the quarterly balance sheet reveals that the net markup income of the amalgamated bank fell by more than 6 per cent — from around Rs252 in 2001 to about Rs236.7 million in January-March 2002. But net non-markup income increased by more than 7 per cent — from Rs126.3 million in 2001 to Rs135.8 million in January-March 2002.

The fall in the markup income may be linked to repatriation of foreign currency deposits after the change in its position. The bank that was earlier operating as a foreign bank started working as a local private bank from September last year.

Whereas the markup-based income comes through charging markup on loans and advances the sources of non-markup income include fees, commissions and brokerage charges; dividend income as well as income earned through dealing in foreign currencies.

Since the provisions made earlier against non-performing loans were higher by Rs1.1 billion than required in January-March 2002 net markup income after provisions went up to Rs237.8 million.

That indeed seems to be a healthy sign because in plainer words it means that the quality of loans improved during the period under review.

Thus the combined income including the income earned through markup and non-markup sources stood at Rs373.6 million at end- March 2002 up from Rs349 million at end-December 2002.

But what reduced the net pre-tax profit to Rs252.86 million at end-March 2002 was the money spent in earning non-markup income. In 2001 the bank had spent Rs120.6 million on earning non-markup income that had lowered its pre-tax profit to Rs228.4 million. In January-March 2002 the expenses on non-markup income rose only slightly to Rs120.7 million.

The balance sheet shows that in the first quarter of this year Faysal Bank made a net additional financing of only Rs74 million as its gross financing rose to Rs24.290 billion at end-March 2002 up from Rs24.216 billion at end-December 2001. Or the bank simply made a net additional lending of Rs74 million to its clients in January-March 2002. But Faysal Bank alone was not the only bank that recorded a nominal growth in net additional lending: banks generally saw faster credit retirement and slower pickup in the demand for fresh credit during this period mainly due to the ongoing economic slump. Yet the banks cannot absolve themselves of their responsibility to reach out to new borrowers not only to employ their surplus liquidity profitably but also to give the economy a boost.

That becomes all the more necessary when one finds that many banks had enough surplus liquidity with them in the first quarter of this year: In case of Faysal Bank this is evident from the fact that its lending to financial institutions rose from Rs1.29 billion at end-December 2001 to Rs4.7 billion at end-March 2002.

But what provides some justification for this is that Faysal’s borrowing from financial institutions also rose from Rs4 billion at end-December 2001 to Rs5.4 billion at end-March 2002.

The deposits of the amalgamated bank declined from Rs31.816 billion at end-December 2001 to Rs29.355 billion at end-March 2002. But since the figures represent the combined accounts of Faysal Bank and Al-Faysal Investment Bank one can attribute the fall in the deposit to some amalgamation-driven withdrawals. So far Faysal Bank itself is concerned it had recorded a growth of Rs900 million plus in its deposit base in 2001: the bank’s deposits had soared to Rs18.432 billion last year up from Rs17.524 billion in 2000.