During 3QCY22, banks achieved their highest-ever quarterly earnings. The top 16 banks reported earnings of Rs. 85 billion, which represents an increase of 26% year over year (YoY).
Ismail Iqbal Securities claims that while robust fees and FX income have been one of the primary revenue drivers, rising interest rates have assisted in boosting Net Interest income (NII).
In particular for loan portfolios, provisions have risen but remain on the low side, and banks have so far mostly escaped the COVID and interest rate shock with little damage. The change in the tax system, which resulted in an effective tax rate of 52 percent as opposed to 41 percent during the same period last year, has been the sole downer.
Due to the delayed effect of asset repricing, the NII of the banks has grown by 17% on a quarter over quarter (QoQ) basis. In terms of individual companies, SCBL (+42 percent QoQ), HMB (+35 percent QoQ), AKBL (+34.9 percent), MEBL (+32.2 percent), and BIPL (+25 percent) outperformed BOP (-9.5 percent) and NBP (+0.7 percent).
Non Markup income decreased by 5% QoQ, mostly as a result of a marginal fall in fees and FX revenue. Although major normalization was anticipated, FX income remained strong and only slightly decreased (2.7 percent QoQ).
To reach Rs. 15 billion, the provisions drastically climbed by 135 percent QoQ. The subjective provision of BAFL and UBL on GOP Eurobonds were the biggest contributors to the rise in provisions. Due to the strong economic inflationary pressures, the Opex jumped by 8.3% QoQ.
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