On Tuesday the Board of Directors of National Bank of Pakistan (NBP) approved financial results of the Bank for the six months period ended June 30, 2014, posting 42 percent increase in net earnings.
On a consolidated basis, NBP has posted profit after tax of PkR7.67 billion (EPS: PkR3.60) for 1HCY14 against restated net profit of PkR6.01 billion (EPS: PkR2.83) for 1HCY13, translating into 28%YoY growth.
Had last year’s accounts not been restated (changes to share of associates’ profit and admin expenses), growth would have tapered to 11%YoY. The result was above expectations with the deviation due to higher than expected Net Interest Income (NII) and exceptionally high capital gains.Key 1HCY14 result highlights include: 1) a 2%YoY reduction in NII, 2) a 66%YoY reduction in total provisions, 3) a 13%YoY non-interest income growth largely due to capital gains and 4) a 12%YoY increase in non-interest expenses.
For 2QCY14 alone, NBP posted net profit of PkR4.44 billion (EPS: PkR2.09), up 79%YoY/38%QoQ making this the best quarter since 1QCY12. Capital gains for the quarter rose to PkR3.83 billion, one of the highest on record which together with a sequential spike in NII, enabled total income to register at record high levels. Despite the high capital gains, deferred tax pushed the overall tax rate for 2QCY14 to 39.3%.The Bank is strongly capitalized with capital and reserves of PKR 160 billion, which translates into break- up value per share of over PKR 75 per share. The bank’s rating was re-affirmed at “AAA” by JCR VIS Credit Rating Agency in June 2014.
At current levels, the target price of PkR65/share implies an accumulate stance. That said, investors must revisit detailed accounts where asset quality position would be critical.