BANKING SURVEY 2015 BANKING SURVEY 2015 Junaidy Shoaib Asad Chartered Accountants 1 BANKING SURVEY 2015 Table of Contents Purpose of the Banking survey 4 Structure of the survey 5 About Us 6 Liability Disclaimer 7 Income Streams 10 Markup vs. Non Markup Income (PK in millions) 10 Non Markup Income Composition 16 Expenses 19 Composition of Markup Income and Markup Expenses 22 Profitability 25 Private Sectors (Profit Before Taxation) 27 Public Sector (Profit Before Taxation) 29 Islamic Sector (Profit Before Taxation) 31 Value Addition 32 Gross Advances 35 Net Advances 39 Non Performing Assets 40 Non performing asset to Gross advances comparison 44 Deposits 45 Deposit composition sector wise 47 Advances to Deposits 51 Capital Adequacy Ratio 54 Junaidy Shoaib Asad Chartered Accountants 2 BANKING SURVEY 2015 Earning per share 57 Performing asset vs. Non performing assets 59 Deposits per branch 65 Administration expenses per branch 67 Markup expense over Markup earned 69 Net Markup Income per branch 71 Fee, commission and brokerage income per branch 73 BASEL III 85 CREDIT RATINGS 95 Glossary 97 Junaidy Shoaib Asad Chartered Accountants 3 BANKING SURVEY 2015 Purpose of the Banking survey The purpose of this survey is to give an overview of the financial performance of the banking industry of Pakistan during the year 2015 and compare the performance of different banks with the preceding year. For this purpose, the banking sector is divided into following three categories, namely: Private Banks Public Sector Banks Islamic Banks There are other classifications of the banking sector as well, but the selected categories cover the broad classifications of each sector. The information contained in this survey has been obtained from the published consolidated financial statements of the banks, statistical bulletins and quarterly / annual reports published by State Bank of Pakistan (“SBP”), analysts and research reports and information published in business magazines and newspapers. To enhance the understanding of ratios and analysis of performance of a particular bank, reference should be made to the published financial statements of the banks and glossary included at the end of this survey. We have tried to provide relevant financial analysis of banks, which we thought would be useful for benchmarking and comparison purposes. Junaidy Shoaib Asad Chartered Accountants 4 BANKING SURVEY 2015 Structure of the survey The three categories, on which the banks are being classified as mentioned above, are from the perspective of Profitability, Assets and Liability. Under these perspectives, the banks are individually analyzed and compared with their peers. The Profitability perspective provides the revenue streams of the banks with more emphasis on mark-up income and non-mark-up income. While under the Assets perspective, the performing and non- performing assets are discussed on the basis of available information. The survey then discusses the liabilities of the respective banks with a focus on the composition and growth in deposits. At the end of this survey, some significant ratios are calculated for each bank and discussed in detail with the aim of highlighting the respective banks’ performance. A detailed list of banks’ operating in Pakistan is presented on the pg. 8. This list also contain list of some microfinance banks operating in the country but they have not been analyzed in this survey. We feel that the performance could be analyzed in more detail however given the availability of limited information and time we have restricted the survey to the analysis as desired in this survey. We would however encourage readers to provide further insight for making the survey more meaningful and useful for banking regulators, banking sector and deposit holders. You can email your suggestion to [email protected] Junaidy Shoaib Asad Chartered Accountants 5 BANKING SURVEY 2015 About Us The firm was established in 2007 and represent Morison International as its member in Pakistan. The firm is delivering value added prompt professional services to its valued clients with strong professional team lead by its Partners and qualified staff through its offices in Karachi, Lahore and Islamabad. Over the last nine years that the firm is operating, it has made its presence felt in the market and has built strong reputation as providers of quality services with almost respect for the Ethical & Moral Standards. The list of our clients to whom we provide professional services include Non Banking Financial Institutions, Public and Private Limited Companies operating in manufacturing, service and trading sectors. JSA provides industry-focused services to its clients in order to build public trust and enhance value through the application of what we call Linked Ideas. Our service culture combined with our cumulative knowledge culminates into innovative solutions to help promote the growth of our client’s business. Before rendering innovative advice, we minutely ensure that all the legal and ethical obligations are respected. This is what we call Innovative Solutions. In brief, our firm is in the profession of audit, accountancy, taxation, corporate finance and corporate advisory services, which include professional services on other related laws like competition law, Foreign Exchange Regulations, etc. Junaidy Shoaib Asad Chartered Accountants 6 BANKING SURVEY 2015 Liability Disclaimer Junaidy Shoaib Asad, Chartered Accountants makes no warranties or representations about this survey or any of its content. We are not responsible for any direct, indirect or consequential loss suffered in connection with the use of this survey. We exclude, to the extent permitted by law, any liability, which may arise as a result of use of this survey. By using this survey on the Banking Industry of Pakistan, you agree to indemnify us for any loss or liability arising out of your use of this survey. This material is produced by Junaidy Shoaib Asad, Chartered Accountants under the voluntary capacity and is based on public information. This survey provides general information in a summarized form on banking industry performance for the year 2015 and 2014. The contents do not compose suggestions and should not be relied upon as such. However, formal advice may be sought in particular matters, if considered necessary. To the extent possible, we have avoided expressing opinion on the performance of banking companies analyzed in this survey. However if any analyses is purported to constitute our opinion the same could only be inadvertent. We have also endeavored to carry out the analysis on uniform criterion, which we consider necessary for establishing benchmarking criteria. Readers are therefore encouraged to enlighten us if they feel some additional criterion or further refinement in the criterion used is necessitated. Date: April 2015 Karachi Junaidy Shoaib Asad Chartered Accountants 7 BANKING SURVEY 2015 PRIVATE BANKS PUBLIC BANKS ISLAMIC BANKS MICROFINANCE Allied Bank Limited (ABL); National Bank of Pakistan BANKS AL Baraka Bank (Pakistan) Askari Bank Limited (AKBL); (NBP); Limited (AB); 1- Khushhali Bank Limited; Bank Alfalah Limited (BAFL); Sindh Bank Limited(SBL); Bank Islami Pakistan Limited 2- APNA Microfinance Bank Bank Al Habib Limited (BAHL); (BIP); Limited; Faysal Bank Limited (FABL); 3- NRSP Microfinance Bank First Women Bank Limited Burj Bank Limited(BB); Habib Bank Limited (HBL) ; Limited; (FWBL); Habib Metropolitan Bank 4- Pak Oman Microfinance Bank Dubai Islamic Bank Pakistan Limited (HMB); Limited; Limited (DIB); The Bank of Punjab(BOP) 5- Tameer Microfinance Bank JS Bank Limited (JS); Limited; MCB Bank Limited (MCB); Meezan Bank Limited (MB) 6- Waseela Microfinance Bank NIB Bank Limited (NIB); The Bank of Khyber (BOK) Limited; and SAMBA Bank Limited (SAMBA); 7- ADVANS Pakistan SILK Bank Limited (SILK) Microfinance Bank Limited Soneri Bank Limited (SONERI); Standard Chartered Bank (SCB); Summit Bank Limited (SUMMIT); United Bank Limited (UBL). Junaidy Shoaib Asad Chartered Accountants 8 BANKING SURVEY 2015 Banking Activities Junaidy Shoaib Asad Chartered Accountants 9 BANKING SURVEY 2015 Income Streams The major source of banks’ income is markup, which they derive through lending activities. Apart from this, they do earn non mark-up income generated through provision of other services to their clients. The following graphical statistics segregate banks income into markup and non-markup income. The statistics shows that around 80% of banks’ income is driven through lending activities. Markup vs. Non Markup Income (PK in millions) Markup vs Non Markup Income (PKR in millions) Markup Non Markup 150,534 900,000 800,000 700,000 600,000 500,000 719,472 400,000 300,000 30,203 200,000 6,529 114,386 100,000 48,109 - private public islamic Junaidy Shoaib Asad Chartered Accountants 10 BANKING SURVEY 2015 Private banks - Markup vs Non Markup Income (PKR in millions) Private banks - Markup vs Non Markup Income (PKR in millions) Markup Non Markup 200,000 180,000 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 - ABL HBL MCB UBL Askari BAF BAH Faysal HMB JS NIB SAMBA SILK Soneri SCB Summit Junaidy Shoaib Asad Chartered Accountants 11 BANKING SURVEY 2015 Private banks - Markup vs Non Markup Income (PKR in millions) 100% 90% Public banks - Markup vs Non Markup (PKR in millions) 80% Markup Non Markup 70% 100% 1,799 409 35,102 3,492 7,636 60%80% 60% 1,516 10,869 31,263 50%40% 114,386 10,129 20% 40% 0% FWBL SBL BOP BOK NBP 30% 20% 10% Islamic banks - Markup vs. Non Markup (PKR in millions) 0% ABL HBL MCB UBL Askari BAF BAH Faysal HMB JS NIB SAMBA SILK Soneri SCB Summit Non Markup 9,755 36,583 17,639 23,687 6,780 9,102 4,486 5,564 9,247 4,298 6,004 805 1,895 3,153 7,117 4,419 Markup 72,116 144,23 80,532 97,574 36,594 61,425 50,310 32,313 36,860 15,465 14,737 5,468 8,933 18,320 33,883 10,710 Junaidy Shoaib Asad Chartered Accountants 12 BANKING SURVEY 2015 Islamic banks - Markup vs.