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Karachi: After a delay of 3yrs, Bank of Punjab (BOP) has disclosed its CY09- CY11 financial statements.
According to AKD Securities, while CY09 and CY10 losses registered at a hefty PkR 10.1 billion and PkR 4.0bn, respectively, the bank has managed to post NPAT of PkR348mn (EPS: PkR0.66) in CY11. This improvement is largely on the back of provisioning reversals even as Net Interest Income has stayed in the red for the 3rd consecutive year (est. NIMs at -1.6% are still too low despite CASA improvement). Problems remain however – despite share deposit money of PkR17bn against future rights, CAR at 7.12% is still below prudential requirement of 10% and asset quality is very poor (48% NPL ratio; 36% provisioning coverage). Regarding the tatter, special exemption has been granted against required provisions of PkR28.6bn (EPS impact: PkR35.2) in lieu of a Letter of Comfort from the Punjab government giving commitment to make good capital shortfall by end-CY16. Auditors, without qualifying their opinion, have emphasized this regulatory exemption. Based on its trailing book value of PkR20.4/share, BOP trades at a P/B of 0.45x. If not for exemption against provisioning, trailing book value would be negative PkR14.8/share.
Balance sheet growth: Deposits have grown at a 13.2% CAGR over the last 3yrs to reach PkR238bn on Dec 31’11. Although CASA has increased to 53% from 44% in CY08, estimated Cost of Funds in excess of 82% is very high and likely indicates intake of very expensive term deposits. It doesn’t help that the Punjab government is charging 3m weighted averaged T-bill yield against its share subscription amount of PkRl7bn. Inline with the banking sector, ADR has contracted from 80% in CY08 to 53% at present. CAR at 7.12% is much higher than 1.05% in CY10, but still remains deeply below requirement, particularly in view of provisioning shortfall.
Income statement analysis: BOP posted NPAT of PkR348mn (EPS: PkR0.66) in CY11 vs. NLAT of PkR 4,029mn (LPS: PkR7.62) in CY10. Improvement has primarily arrived on the back of loan provisioning reversals, to the tune of PkR3.2bn. While estimated NIMs have improved from negative 05% in CY09 to positive 1.6% in CY11, these still remain very low. Dividend income has dropped to just PkR286mn in CY11 from PkR 2,021mn in CY08. Besides dissolution of the NIT-LOC fund AKD Securities attributes this decline to a shift away from investment in mutual hinds (from PkR12.3bn in CY07 to PkR3.8bn in CY11). 3yr admin expense CAGR of 12.2% appears acceptable in view exemption against required provisioning of PkR28.6bn in lieu of a Letter of Comfort from the Punjab government giving commitment to make good capital shortfall by end-CY16. Considering loan book concentration remains high (28% of loans are to the Textile sector), further asset quality deterioration remains a risk although, on the flipside, potential for provisioning reversals is immense. Nevertheless, AKD Securities believes that unless sizeable recoveries are made, the Punjab government will likely have to carry BOP for at least the next few years.
| BOP: Key Statistics | |||||
| Year End Dec 31 | CY07 | CY08 | CY09 | CY10 | CY11 |
| EPS (PkR) | 8.41 | (19.02) | (19.04) | (7.62) | 0.66 |
| PER (x) | 1.10 | n.m | n.m | n.m | 14.00 |
| BVS (PkR) | 35.92 | 7.05 | 11.68 | 6.94 | 20.37 |
| P/BVS (x) | 0.26 | 1.31 | 0.79 | 1.33 | 0.45 |
| ROE | 34.5% | -99.8% | -190.5% | -95.0% | 5.3% |
| ROA | 1.9% | -5.4% | -4.6% | -1.8% | 0.1% |
| Loan to Deposit | 70% | 80% | 64% | 58% | 53% |
| Market Cap. To Deposits | 3% | 3% | 3% | 2% | 2% |
| Growth in Loan Book | 32% | -2% | -8% | 0% | 5% |
| Growth in Deposits | 39% | -15% | 16% | 9% | 14% |
| Source: Company Reports and AKD Research | |||||
| BOP: Profit and Loss Account | |||||
| (PkR million) | CY07 | CY08 | CY09 | CY10 | CY11 |
| Interest Income | 17,539 | 17,753 | 15,642 | 18,220 | 20,685 |
| Interest Expense | 13,939 | 16,614 | 19,022 | 18,802 | 21,073 |
| Net Interest Income | 3,600 | 1,139 | (3,381) | (581) | (388) |
| Total Provisions | 1,888 | 19,230 | 10,183 | 3,320 | (2,633) |
| Post Prov NII | 1,712 | (18,091) | (13,563) | (3,902) | 2,244 |
| Non Interest Income | 5,423 | 4,183 | 2,219 | 1,883 | 1,990 |
| Non Interest Expense | 2,289 | 2,925 | 3,029 | 4,168 | 3,711 |
| Profit before taxation | 4,846 | (16,833) | (14,374) | (6,186) | 523 |
| Profit after taxation | 4,446 | (10,060) | (10,069) | (4,029) | 348 |
| Source: Company Reports and AKD Research | |||||
| BOP: Balance Sheet | |||||
| Year End Dec 31 | CY07 | CY08 | CY09 | CY10 | CY11 |
| Investments | 73,462 | 22,690 | 57,960 | 56,403 | 92,581 |
| Loans and advances | 133,894 | 131,724 | 121,316 | 120,818 | 127,130 |
| Total Assets | 234,974 | 185,893 | 216,670 | 229,190 | 280,998 |
| Deposits and Other Accounts | 191,969 | 164,072 | 190,858 | 208,177 | 237,897 |
| Total Liabilities | 215,978 | 182,165 | 210,494 | 225,522 | 270,225 |
| Net Assets | 18,996 | 3,728 | 6,176 | 3,668 | 10,773 |
| Share Capital | 4,230 | 5,288 | 5,288 | 5,288 | 5,288 |
| Total Tier I Equity | 15,110 | 5,041 | 5,531 | 2,947 | 10,135 |
| Total SHEQ | 18,996 | 3,728 | 6,176 | 3,668 | 10,773 |
| Total SHEQ and Liabilities | 234,974 | 185,893 | 216,670 | 229,190 | 280,998 |
| Source: Company Reports and AKD Research | |||||