NBP announced earnings today for 9MCY20 at PKR 26.2bn (EPS: PKR 12.28), depicting a YoY increase of 58% and QoQ surge of meagre 1%. NII growth for the bank has been impressive during 9MCY20 while hefty provisioning charges were also booked. Capital gains during the quarter provided fuel to NFI.

Result Highlights

·        NII of the bank settled at PKR 80bn during 9MCY20, increasing by 48% YoY, however decelerating by 2% QoQ despite interest expense declining by 28% QoQ. Interest earned was down too, 16% QoQ, however, on YoY it recorded a jump of 23%. Aggressive rate cuts stimulated the bank’s topline.

·        NFI of the bank increased 7% YoY as huge jump in capital gains (11.4x YoY) were countered by drastically lower dividend income (-47% YoY),other income (-24% YoY) and FX income (down 22% YoY). On a sequential basis NFI decreased 4% QoQ as the bank reported decline in FX income (64% QoQ), Dividend Income (59% QoQ) and Other Income (40% QoQ).

·        With a strong surge in NII came in a drastic spike in provisioning which clocked in at PKR 23.2bn during 9MCY20, up 168% YoY. During 3QCY20 alone NBP posted provisioning of PKR 7.6bn (+124% YoY) which was down 34% QoQ (to recall, NBP recorded a huge provisioning of PKR 11.6bn in 2Q). This decline in provisioning on quarterly basis was expected as the bank had already booked a hefty general provisioning charge early to build cushion against deterioration in credit quality owing to the impact of the pandemic.

·        OPEX clocked in 8% higher YoY and 1% lower QoQ. Cost/Income ratio settled at 42% during 9MCY20 against 53% SPLY, while clocking in at 38% during 3QCY20.

·        The bank booked an effective tax rate this quarter of 38% and 34% during 9MCY20.

(AHL Research).