National Bank of Pakistan (NBP) is the only bank amongst the top-five banks which has not shied away from lending to the private sector of late. It’s relatively higher ADR, of over 60 percent as per latest available numbers, is a testament to that. So, while its peers got criticised for lazy and complacent banking, NBP was lauded for doing what banks are supposed to do: lend.

While there is no doubting NBP’s good intention-–aggressive lending simply seems to have largely backfired. It is fair to say that NBP saw it coming, which shows in the lending trends as per September numbers. But the damage, it seems had already been done. The bank’s infection ratio stands at a worrying 15 percent, hence the higher provision expense for CY13, which more than doubled year on year and wreaked havoc to the bottom line. The loss in Bangladesh should be an eye-opener for better MIS and monitoring.

The CASA ratio, too, does not seem to be moving in the right direction. Slowdown in interest rates further spoiled the party, shrinking the spreads. There is no doubt that NBP could have avoided the fate by simply doing what other banks of similar size are doing: miserly lending.

But, that is not what NBP thinks it is out there to do. That said a little more prudence would not have done any harm. After all, NBP’s mea culpa lends more credence to the lazy bankers’ viewpoint that CY13 just was not the right time to be lending.

All else were mere footnotes, as non-core income and expenses did not alter the story to any considerable degree. All said, it is not all lost for the banking giant, as interest rates are expected to pick up, and NBP should be in a good position to cash on that. Furthermore, the bank’s drive to focus on current deposits should yield it dividends in the present-day world of increased return on deposits. Lending against Prime Minister’s Youth Scheme needs to be strictly monitored at both the client and branch levels.

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National Bank of Pakistan (Unconsolidated P&L)


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Rs (mn)                                  CY12        CY13         chg


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Markup Earned                         100,092      99,028         -1%


Markup Expensed                        56,418      60,823          8%


Net Markup Income                      43,674      38,205        -13%


Provisioning/(Reversal)                10,688      19,491         82%


Net Markup Income after provisions     32,986      18,714        -43%


Non Mark-up/Interest Income            23,849      25,570          7%


Operating Revenues                     56,835      44,284        -22%


Non Mark-up/Interest Expenses          35,457      37,205          5%


Profit Before Taxation                 21,378       7,078        -67%


Taxation                                6,437       1,578        -75%


Profit After Taxation                  14,941       5,500        -63%


EPS (Rs.)                                7.02        2.59


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