ISLAMABAD: In 2024 Pakistan’s listed banks profitability earned a profit of Rs 600 down by 1% YoY and 2% QoQ in 4Q 2024 despite paying tax of Rs 650 billion.
According to Topline Securities, despite the decline in interest rates, the sector’s NII clocked in at Rs523bn, up 5% YoY and 4% QoQ in 3Q2024, led by volumetric growth and favourable repricing impact. Interest income declined by 4% YoY and 13% QoQ to Rs1.6trn, whereas interest expense declined by 8% YoY and 20% QoQ to Rs1.1trn.
On the other hand, non-interest expense rose by 30% YoY and 42% QoQ to Rs329bn in 4Q2024 due to NBP’s one-time pension expense. In the full year 2024, NBP has booked total pension expanse of Rs57bn.
This takes the sector’s Cost-to-Income ratio to 47% in 4Q2024, compared to 40% in 4Q2023 and 42% in 3Q2024. The sector recorded a provisioning charge of Rs34bn in 4Q2024, up 39% YoY and 29% QoQ. This increase is primarily due to the implementation of IFRS-9 and some stress in sectors like textile and steel, according to our channel checks.
Effective tax rate for 4Q2024 stood at 56%, compared to 53% in 3Q2024. To recall, this higher effective tax rate is due to an increase in the overall tax rate for banks from 49% (including super tax) to 54% (including super tax) at the end of the quarter.
In 2024, the profitability of banks increased by 5% YoY to Rs597bn, mainly driven by a 9% growth in NII to Rs1.9trn and a 50% jump in Non-Interest Income to Rs560bn. For our analysis, we have taken all listed banks that have announced their financial results except for Bank of Khyber (BOK), Samba Bank (SBL), and Silk Bank (SILK), which have not yet announced their results. Bank wise, Meezan Bank (MEBL), United Bank (UBL), MCB Bank (MCB), Habib Bank (HBL), and Standard Chartered Bank (SCBPL), posted highest profits of Rs101.5bn, Rs75.8bn, Rs63.5bn, Rs57.8bn and Rs46.1bn, respectively in 2024. On the other hand, only Bank Makramah (BML) recorded loss of Rs5.2bn in 2024.
In terms of Nil growth, Meezan Bank (MEBL), Bank Al Habib (BAHL), JS Bank (JSBL), United Bank (UBL), and Bankislami (BIPL) recorded highest YoY growth of 27%, 26%, 22%, 16% and 15%, respectively in 2024.
In 2024, most banks maintained their dividend payouts. NBP also resumed its payouts after 7 years (last paid in 2016) by announcing a dividend of Rs8/share, the highest ever declared by the bank. Moving forward, we expect this trend to continue amid the sector’s healthy profitability. Topline Banking Universe is trading at a compelling valuations, with 2025E PE and PBV of 5.7x and 1.0x, respectively having a ROE of 18%.
