The National Bank of Pakistan (PSX: NBP) has reported a stark 75.03% decline in net profit for the third quarter ending September 30, 2024, posting earnings of Rs3.09 billion [EPS: Rs1.39], down from Rs12.38 billion [EPS: Rs5.78] in the same period last year. This steep drop is primarily attributed to a sharp decline in net interest income, despite a significant improvement in non-markup income.
Key Financial Highlights
- Net Interest Income Decline: NBP’s net interest income plunged by 29.44%, totaling Rs33.56 billion compared to Rs47.55 billion in the same quarter last year. The decline in interest income—down nearly Rs14 billion—is a primary driver behind the bank’s reduced profitability.
- Non-Markup Income Surge: In contrast, the bank’s total non-markup income increased by 94.75% year-over-year (YoY) to Rs13.18 billion. Gains in securities and improvements in fee and commission income contributed significantly to this surge. Specifically, gains on securities rose to Rs4.67 billion, a 209.93% increase from the previous year, while fee and commission income climbed 20.06% to Rs5.99 billion.
- Overall Income Decline: Despite a rise in non-markup income, total income for the quarter dropped by 13.97% to Rs46.73 billion from Rs54.32 billion, driven by reduced interest income.
- Rising Expenses: The bank’s non-markup expenses rose by 34.94% to Rs29.36 billion, with operating expenses increasing 34.91% to Rs29.33 billion and other charges surging by 118.20%. Higher costs further impacted the bank’s net profitability.
Provision Expense Reduction and Tax Impact
NBP’s provision expense declined sharply by 68.48% to Rs2.91 billion, down from Rs9.24 billion in Q3 2023. The bank reported a total tax expense of Rs11.38 billion for the quarter, up 3.88% YoY, which continued to weigh on the bottom line.
Consolidated Financial Overview for Q3 CY24 (in ‘000 Rupees)
| Financial Indicator | Sep-24 | Sep-23 | % Change |
|---|---|---|---|
| Mark-up/Interest Earned | 271,194,298 | 296,473,613 | -8.53% |
| Mark-up/Interest Expensed | 237,638,740 | 248,919,353 | -4.53% |
| Net Mark-up/Interest Income | 33,555,558 | 47,554,260 | -29.44% |
| Non-Markup/Interest Income | |||
| Fee and Commission Income | 5,991,917 | 4,990,748 | 20.06% |
| Dividend Income | 1,088,800 | 1,041,994 | 4.49% |
| Foreign Exchange Income | 1,219,014 | (1,695,417) | -171.90% |
| Gain on Securities (Net) | 4,670,055 | 1,506,798 | 209.93% |
| Other Income | 183,506 | 555,776 | -66.98% |
| Total Non-Markup/Interest Income | 13,178,941 | 6,767,044 | 94.75% |
| Total Income | 46,734,499 | 54,321,304 | -13.97% |
| Non-Markup/Interest Expenses | |||
| Operating Expenses | 29,335,404 | 21,744,613 | 34.91% |
| Other Charges | 19,749 | 9,051 | 118.20% |
| Total Non-Markup/Interest Expenses | 29,355,153 | 21,753,664 | 34.94% |
| Profit Before Provisions | 17,379,346 | 32,567,640 | -46.64% |
| Provisions Expense | (2,912,099) | (9,237,614) | -68.48% |
| Profit Before Tax | 14,467,247 | 23,330,026 | -37.99% |
| Taxation | (11,375,897) | (10,950,997) | 3.88% |
| Profit After Tax | 3,091,350 | 12,379,029 | -75.03% |
| EPS | 1.39 | 5.78 | – |
Conclusion
The National Bank of Pakistan’s financial performance for Q3 CY24 reflects challenges primarily stemming from a decline in net interest income and increased operating expenses. While the bank’s non-markup income provided a buffer, it was insufficient to offset the impact of falling interest income and rising costs. Looking ahead, NBP will need to focus on cost management and exploring revenue diversification to stabilize earnings in an environment marked by fluctuating interest rates and economic pressures.
