Askari Bank Limited (PSX: AKBL) announced earnings (PAT) today for the first three months of 2024 (1QCY24) at Rs. 3.7 billion, depicting a decrease on both YoY and QoQ basis by 21 percent and 46 percent, respectively.
According to Arif Habib Limited (AHL), the decrease in overall profitability was mainly caused by increased provisioning compared to the reversals recorded in the same period the previous year.
QoQ, the decline in markup income, coupled with higher provisioning, led to the overall earnings decrease.
In the 1QCY24, the bank recorded a Net Interest Income of Rs. 12.9 billion, reflecting an 8 percent rise compared to the same period in the previous year, but experiencing a 32 percent decrease QoQ.
Interest earned saw a significant surge of 76 percent compared to the previous year and a 13 percent increase from the previous quarter. However, interest expenses witnessed a whopping 94 percent increase compared to the same period last year, along with a 25 percent QoQ rise.
During the outgoing quarter, Non-Markup income experienced a 23 percent YoY growth and a 19 percent QoQ jump. This YoY surge was mainly propelled by a 9 percent growth in Fee Income, a 13 percent rise in FX income, and a gain on the sale of securities amounting to Rs. 274 million, compared to a loss of Rs. 91 million recorded in the same period last year. However, on a QoQ basis, Fee income decreased by 10 percent, and gains on the sale of securities decreased by 51 percent.
In the 1QCY24, the bank reported a total provisioning of Rs. 1.17 billion, compared to a provisioning reversal of Rs. 58 million recorded in the same period last year. Additionally, on a QoQ basis, provisioning witnessed a significant increase of 325 percent.
The bank’s operating expenses during 1QCY24 totaled Rs. 8.2 billion, reflecting a 21 percent increase compared to the same period last year, while experiencing a meager 1 percent jump from the previous quarter. With this, the Cost/Income ratio stood at 49 percent for 1QCY24, up from 45 percent in the same period last year.
The effective tax rate for the bank was set at 49 percent during 1QCY24, showing an increase from 44 percent in the same period last year.
AKBL posted earnings per share (EPS) of Rs. 2.6 for 1QCY24 compared to an EPS of Rs. 3.2 in 1QCY23.
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Surprising,shocking that Askari Bank profit declined by big margins. Whereas it’s competitors ( other banks) profit sky docketed during this period. General impression is that Askari Bank has access to funds of Fauji Foundation, Army welfare and and other military foundations. Availability of funds at affordable rates is the key to making profits. Mark up rate is very high and that has resulted in the boost of profitability of big banks. Why Askari Bank faced decline in profitability needs investigation?