Karachi, October 30, 2024 – National Bank of Pakistan (NBP) reported a substantial 76% drop in after-tax profits for the nine-month period ending September 30, 2024, driven by escalating operational costs and intense inflationary pressures.
According to NBP’s latest financial results, the bank’s after-tax profit fell to Rs. 9.03 billion, a steep decline from Rs. 38.15 billion in the same period last year. This reduced profitability is reflected in earnings per share (EPS), which dropped to Rs. 4.24 from Rs. 17.93.
Despite earning a gross interest income (GII) of Rs. 833.7 billion, up from Rs. 728.7 billion year-on-year due to increased interest-bearing assets and favorable policy rates, rising costs offset these gains. The NBP’s investment income showed a 20.5% increase from the prior year, with average yields of 20.17%. However, with an emphasis on short-term investments, the bank faced challenges in sustaining a consistent revenue stream.
NBP’s net interest income (NII) fell 12.8% to Rs. 105.2 billion compared to Rs. 120.6 billion in the same period last year, as higher costs on deposits and a spike in non-performing loans from state-owned entities strained returns. The bank’s loan book contributed Rs. 170.6 billion, reflecting a modest 3.7% growth, achieved by expanding corporate and retail portfolios despite burdensome costs and unfavorable loan conditions.
On a more positive note, NBP’s non-fund income (NFI) surged by 69.9% to Rs. 42.0 billion, largely due to capital gains, which increased by 528.3% to Rs. 15.2 billion. This includes proceeds from the sale of shares in United National Bank Limited (UNBL), contributing to NBP’s resilience in non-interest income streams. Foreign exchange income also rose sharply by 126.6%, closing at Rs. 5.1 billion, supported by favorable exchange conditions. Increases in fee and commission revenue and dividend income further strengthened NFI.
However, soaring operational expenses, primarily in HR and IT costs, impacted the bottom line. The bank’s operating expenses for the period rose to Rs. 77.9 billion, marking a 19.4% increase from last year, driven by inflationary pressures and sector-wide cost escalations. With rising costs, NBP’s cost-to-income ratio climbed to 52.9% from the previous year’s 45.0%.
Despite these challenges, the NBP remains cautiously optimistic, expecting economic stability to bolster foreign reserves and equity markets. Looking ahead, the bank’s strategy will focus on cost control and maintaining revenue resilience amidst economic volatility. However, the road to recovery remains arduous as the bank confronts fiscal headwinds in an unpredictable economic climate.