Banks in Pakistan maintained handsome profitability growth mainly because of periodic increases in the policy rate by the State Bank of Pakistan (SBP) which also improved their margins from different earning sources during 2022.
According to Topline Securities, profits after tax (PAT) of Pakistan’s listed banks increased by 15 percent year on year (YoY) to Rs. 307 billion in 2022. Despite record high-interest rates, the slowdown in profit growth is primarily due to higher provisions and taxation. Pre-tax profitability (PBT) was up 42 percent YoY in 2022 while pre-tax profits before provisioning were up 50 percent YoY.
In US$ terms, listed banks’ PAT fell 8 percent YoY to US$ 1.5 billion while PBT was up 13 percent YoY to US$ 3.1 billion.
Net Interest Income (NII) of the sector clocked in at Rs. 1.1 trillion in 2022 versus Rs. 758 billion in 2021 as average policy rates during 2022 clocked in at 13.52 percent versus 7.42 percent in 2021.
The banks also faced challenges in paying higher taxes to the government with the re-imposition of Super Tax and additional tax on lower Advance-to-Deposit ratio.
Among 10 leading profitable banks in Pakistan, eight banks reported all-time high profits whereas two banks recorded a slight decrease in profitability during 2022. The banks also shared reasonable dividends with their shareholders throughout the calendar year.
Here are the consolidated details:
1. Meezan Bank
Meezan Bank, the biggest Islamic bank in Pakistan, is now the most profitable bank in the country. It registered many records in 2022 with the most prominent one being the highest-ever profit in the banking industry. The bank jumped to the top spot from 5th position in one year.
It posted a profit of Rs. 45 billion in 2022, a 59 percent growth from the profit of the last calendar year. The total cash dividend payout for the year 2022 announced stood at Rs. 8.50 (85 percent) per share. The financing-to-deposit ratio stood at the highest in the industry, at 61 percent.
2. MCB Bank
MCB Bank maintained its second position. It made a decent growth of 6.6 percent in profitability which stood at Rs. 34.45 billion in 2022. The earning per share increased to Rs. 29 as compared to the EPS of Rs. 26.31 reported in the last year. The board of directors declared a final cash dividend of Rs. 6.0 per share i.e. 60 percent, in addition to 140 percent already paid, bringing the total cash dividend for the year 2022 to 200 percent.
3. Habib Bank Limited
Habib Bank Limited lost its crown in the banking industry. The bank posted its second-highest profit of Rs. 34.4 billion in 2022. The dent in profitability was due to the high taxes on the bank. The bank declared a final dividend of Rs. 1.50 per share taking the total payout for 2022 to Rs. 6.75 per share.
4. United Bank Limited
United Bank Limited (UBL) maintained its upward trajectory with a profit surging to an all-time high level of over Rs. 32 billion in 2022. The bank reported a modest growth of 4 percent or Rs. 1.18 billion as compared to the last year. The bank proposed a final cash dividend of Rs. 9.0 per share for the year 2022. This was in addition to Rs. 13.0 already paid during the year bringing the total dividend for the year to Rs. 22.0 per share, the highest in the industry. The bank slipped from 3rd place to 4th place in the rankings.
5. National Bank
National Bank of Pakistan (NBP) maintained its growth in profitability which surged to over Rs. 30.9 billion in 2022. Previously, the bank reported the highest-ever profit of Rs. 30.5 billion in 2020. No cash dividend was announced by the bank’s board. The bank’s ranking dropped to 5th from 4th.
6. Allied Bank Limited
Allied Bank Limited (ABL) has improved its ranking in the list of top profitable banks from 8th to 6th. The bank reported a profit growth of 22 percent from the last year with the bottomline at Rs. 21.2 billion, an all-time high profit.
The board announced Rs. 2.5 per share dividend or 25 percent in addition to 60 percent already announced during 2022.
7. Standard Chartered Bank
Standard Chartered Bank Pakistan maintained its profit trajectory this year too with a record all-time high profit of Rs. 19.84 billion reported in 2022, which is 45 percent higher than the previous year. This is the highest-ever profit of the bank.
The board of directors announced a final cash dividend of 25 percent (Rs. 2.50/- per share) resulting in the highest-ever full-year dividend of 40 percent (Rs. 4.00/- per share). The share value of the bank increased to 5.13 from 3.55. The bank’s ranking improved by two positions.
8. Bank Alfalah
The bank posted handsome profit growth of 27 percent compared to last year with profitability reaching Rs. 18.4 billion. The board declared a final cash dividend of Rs. 2.5 per share (25 percent). This is in addition to an interim cash dividend of Rs. 2.5 (25 percent).
9. Bank AL Habib
Bank AL Habib reported a drop of 11 percent in profitability in 2022 primarily due to provisioning in sovereign bonds. It is the second bank that saw a decline in profitability among the top ten banks in the country.
The bank reported a profit of Rs. 16.6 billion in 2022 against Rs. 18.6 billion reported last year, showing a decline of Rs. 2 billion. The bank announced a 70 percent dividend for its shareholders. The bank fell to 9th place from the previous year’s ranking of 6th.
10. Habib Metro
Habib Metro Bank established its position among the top 10 profitable banks in Pakistan in 2022. It reported a profit of Rs. 14.9 billion with a growth of 8 percent from last year, which is also the highest-ever profit made by the bank. The bank had close competition with Askari Bank which posted a profit of Rs. 14 billion.
The final cash dividend was announced at Rs. 3.25 per share i.e. 32.5 percent in addition to the interim dividend already paid at Rs. 2.00 per share i.e. 20 percent, totaling Rs. 5.25 per share i.e. 52.5 percent.
The competition is intense among mid-sized banks including Habib Metro Bank, Askari Bank Limited, Bank of Punjab, and Faysal Bank.
Askari Bank bounced back in 2022 but it failed to make its position among the top 10 most profitable banks by a close margin. It posted a profit of Rs. 14 billion in 2022. Faysal Bank Limited reported a profit of Rs. 11.4 billion and Bank of Punjab made a profit of Rs. 10.6 billion.
In 2022, BankIslami, and Meezan Bank reported the highest earnings growth of 128% and 59% respectively. On other hand, Summit Bank Ltd (SMBL) and Samba Bank (SBL) reported a loss of Rs. 3.2 billion and Rs. 428 million respectively while Soneri Bank (SNBL) and Bank of Punjab (BOP) reported earnings decline of 34% and 14%, respectively in 2022.
The central bank’s decision to raise policy rates is expected to boost banks’ profitability. Additionally, banks can earn money through investments in government bonds and from gains in currency exchange in 2023. Banks may also strive to avoid extra taxes related to their advance-to-deposit ratio.
Banks will face the challenge of the high cost of operations with the rising inflation, mainly the logistics and utility costs. But the banks are expected to continue to expand their network and business in 2023, potentially generating more employment in the industry.