KARACHI, Feb 26: The big-5 banks, as a whole, managed to post a profit in the calendar year 2012 but money making may be difficult for bankers in the coming quarters due to shrinking margins.

With eroding core business, big banks’ earnings posted a nominal growth of 6 per cent in 2012 to reach Rs88.3 billion while pre-tax profit was almost flat increasing by just 2 per cent, according to a report by Topline Research.

In fact Dec quarter earnings fell 3 per cent from Sep quarter. Decline in NII (net interest income) was compensated by lower provisioning while increase in administration cost was managed by rising non-interest income.

This compares unfavorably with 20 per cent profit growth seen in 2011. Unlike 2011, where Net Interest Income (NII) remained the prime earning driver for large banks, declining provisions and better non-interest income supported the bottom line in 2012, said the report.

The analysis was based on unconsolidated earnings of 5 large banks (NBP, HBL, UBL, MCB and ABL) representing 72 per cent of the sector’s market capitalization, over 60 per cent of branch network and contributing 55 per cent of banking deposits. Except for NBP whose profits were down 8 per cent, remaining four banks posted an improvement in profits in 2012 as shown in accompanied table.

The report said 250 basis points fall in policy rate in 2012 coupled with maintenance of minimum deposit rate at 6 per cent on PLS accounts affected NII of these banks.

In 2012, cumulative NII declined by 6 per cent or Rs13.3 billion to Rs197.5 billion as against Rs210.8 billion during the previous year where NII grew by 15 per cent. HBL posted the highest NII growth of Rs1.2bn or 2 per cent to reach Rs56.1 billion, while ABL’s NII fell by Rs6.8 billion n or 27 per cent to Rs18.4 billion, said the report. The declining provisions, especially on advances, remained one of the prime supporters of the profitability growth during the year. In 2012 total provisioning of large banks stood at Rs18.5 billon, as against Rs30.5 billion down by Rs12 billion or 39 per cent.

The report said the rise of Rs17.1 billion or 29 per cent in non interest income led by booming bond and stock market help compensate for rising inflation driven admin charges. Admin and relate costs of these banks grew by Rs13.8 billion or 13 per cent in 2012 to reach Rs119.5 billion.