State Bank of Pakistan earned a profit of Rs. 760.859 billion in FY21 as compared to a profit of Rs. 1.1634 trillion in FY20, registering a decline of 34 percent year-on-year, according to the annual performance report.
The decline in profit is primarily attributed to lower income from lending to the government. Pakistan Investment Bonds (PIBs) worth Rs. 569 billion matured during the year, and no fresh lending was made by the bank to the federal government, resulting in lower income under this head. Moreover, a decrease in the average interest rate during FY21 also impacted adversely on income from lending to government.
Income from reverse repo transactions and foreign currency deposits also witnessed a decline while charges on account of fair value adjustment on COVID-19 loans significantly increased during the year. The decline in income from these major income/expense streams is partly offset by a decrease in interest/mark-up expense and operating expenses.
SBP group also earned a higher net exchange gain during FY21 compared to the previous year due to appreciation of PKR against other currencies, especially USD, during the year.
Interest Income
The interest/markup income decreased by Rs. 453.033 billion to Rs. 755.588 billion, registering a decrease of 37 percent. For SBP, lending to the government of Pakistan (GoP) remained the major source of income during the year, which dropped by 39 percent due to the maturity of PIBs worth Rs. 569 billion and no further lending to the GoP during the year.
Income under this head also declined due to a decrease in the average interest rate on PIBs during the year. The income earned on lending to commercial banks through OMO injections decreased by 30 percent due to a decline in average interest rate despite larger volumes of monetary injections during the year.
Exchange Gains
The bank earned a net exchange gain of Rs. 135.328 billion during FY21 compared to an exchange gain of Rs. 66.402 billion during FY20. There is a net FCY liability position (including off-balance sheet commitments) that resulted in net exchange gain as PKR appreciated against USD, SDR, and other currencies during the period.
Exchange Gain
The exchange gains/ (losses) arise on FCY assets and liabilities of the bank. A major part of the foreign currency assets of the bank is USD denominated whereas the foreign currency liability exposure is mainly SDR and USD denominated. Accordingly, the movement in the PKR/SDR and PKR/USD exchange rates directly affects the exchange rate account. The bank earned a net exchange gain of Rs. 135.328 billion during FY21 compared to an exchange gain of Rs. 66.402 billion during FY20.
There is a net FCY liability position (including off-balance sheet commitments) that resulted in net exchange gain as PKR appreciated against USD, SDR, and other currencies during the period.
Other Operating Income
Other operating income includes penalties levied on banks/financial institutions, licenses and e-CIB fees, gains/ (losses) on sale, and re-measurement of investments, and other income. Income under this head decreased to Rs. 3.672 billion in FY21 from Rs. 8.604 billion in last year.
The decrease is primarily due to a decline in income on penalties levied on banks and financial institutions, licenses fee, e-CIB fees, which is partly offset by an increase in gain on disposal of foreign investments classified as “fair value through profit or loss.”
Operating Expenditure
The total expenditure during the year was Rs. 54.276 billion as against Rs. 59.089 billion in FY20. The decrease is due to a 17 percent decline in general administrative and other expenses and a 13 percent decrease in agency commission.
General Administrative and Other Expenses
The general administrative expenses include employees’ salaries and other benefits, retirement benefits, fund managers and custodians’ expenses, training expenses, legal and professional expenses, depreciation, repair, and maintenance, etc.
The overall general and administrative expenses decreased to Rs. 29.320 billion in FY21 from Rs. 35.168 billion in FY20, thus registering a decrease of Rs. 5.848 billion. A major decrease was witnessed in retirement benefits, salaries and other benefits, and legal and professional expenses during the period. A summary of the general, administrative, and other expenses.
Balance Sheet Summary
The total assets stood at Rs. 13.603 trillion as of June 30, 2021, as compared to Rs. 12.273 trillion on June 30, 2020, registering an increase of Rs. 1.330 trillion primarily due to an increase in securities purchased under agreement to resell.
The increase in total assets can also be attributed to the increase in foreign currency accounts and investments, loans, and advances to banks and financial institutions in order to promote the economic activities in the priority sectors and increase in SDRs of IMF. The total liabilities of the bank stood at Rs. 12.446 trillion as of June 30, 2021, as compared to Rs. 11.219 trillion as of June 30, 2020, registering an increase of Rs. 1.227 trillion. This rise was primarily led by an increase in currency in circulation.
