The positive volumetric growth in average earning assets supplemented by gradually increasing balance sheet spreads enabled the bank to post Net Interest Income (NII) of Rs 18,733 million; representing a healthy growth of 19 percent from the comparative period.
Diversification of revenue streams through continuous enrichment of the bank's product suite along with concurrent focus on upholding high service standards enabled the bank to post a 12% growth in fee income which stood at Rs 2,522 million.
Capitalizing on opportunities in the interbank FX market through prudent positioning of Banks foreign exchange (FX) assets and liabilities, income from dealing in foreign currencies posted a significant growth of 86%, closing the period under review at Rs 1,257 million as compared to Rs 674 million in the corresponding period.
Prudently anticipating the aforementioned interest rate hikes, the bank's timely divestment of fixed income portfolio mitigated risk of any significant mark to market losses. Further, active participation as Primary Dealer (PD) resulted in realization of capital gains of Rs 386 million. This superior PD performance was also recognized by SBP, as the Bank was ranked the No. 1 PD in the market during the FY 2018-19.
Resultantly, non-markup income aggregated to Rs 5,328 million for the period under review, as against Rs 6,555 million in the corresponding period of 2018.
Contributing towards SBP's Financial Inclusion agenda, the bank took concrete measures through augmentation of digital and conventional banking services. Branch outreach expanded to 1,345 branches. ATM network also increased to a total of 1,447 ATM's inclusive of 1,135 on-site and 312 off-site ATM's.
Upon attaining a reasonable footprint of 117 Islamic Banking branches, sustained focus on further promoting Islamic Banking amongst a vast potential customer base was also maintained with the addition of 50 "Islamic Windows" at viable conventional branches.
Centralization and automation of operations assisted the Bank to restrict increase in non-markup expenses. However, the operating cost has witnessed an increase of 15.8% due to significant currency devaluation, higher compliance related regulatory charges, aforementioned network expansion, continuous augmentation of technology infrastructure and above all incurring additional expense of Rs 469 million on account of deposit protection charge levied effective from third quarter 2018.
During the period under review the bank also offered voluntary lump sum settlement against pension and commutation to in-service management grade eligible employees attaining superannuation on or after 1st January 2020. Voluntary exercise of this option led to an additional charge of Rs 130 million; excluding deposit protection and voluntary pension costs the increase in operating expenses comes down to 10.4%.
During the period under review, the bank adopted the International Financial Reporting Standard IFRS 16 - "Leases", which has introduced the concept of recognizing right of use (RoU) assets and corresponding lease liabilities on the Balance Sheet of the lessee. Resultantly, implicit interest expense amortized on lease liabilities led to an additional charge of Rs 486 million; thereby impacting the Bank's NII. Whereas, reversal of rental expense netted off against incremental depreciation charged on RoU assets led to a net decline of Rs 77 million in the operating expenses.
The bank's profit before provisions during the period under review stood at Rs 10,810 million. However, barring the aforementioned net additional impact of Rs 409 million booked under IFRS-16, deposit protection cost charge of Rs 469 million and voluntary lump sum settlement against pension of Rs 130 million, business as usual profit before provisions increases to Rs 11,818 million compared to Rs 10,790 million earned in the comparative period; representing a growth of 9.5%.
Proactive monitoring and recovery efforts led to a net provision reversal against non-performing loans (NPL's) and investments aggregating to Rs 289 million for the period under review. No FSV benefit has been taken while determining the provision against non-performing advances as allowed under guidelines of the State Bank of Pakistan.
Profit after current years' taxation stood at Rs 6,921 million. Incremental super tax levy for the tax year 2018, led to an additional charge of Rs 835 million which was booked in the Q1 2019. Resultantly, despite the aforementioned significant challenges, the bank posted a stable profit after tax of Rs 6,086 million during the period under review.
In view of the above developments, EPS of the bank stood at Rs 5.31 per share. Return on Equity (ROE) and Return on Assets (ROA) also stood at a strong level of 14% and 0.9% respectively.
The bank, while adopting a prudent approach amidst the rising credit risks; capitalized upon its robust risk management framework to close the gross Advances at Rs 459,500 million at end June' 19. Overall industry advances growth also remained subdued with just 3% growth from December 2018 against growth of 13% registered in the comparative period.
Proactive adoption of appropriate risk management measures has also resulted in improved infection and coverage ratios which were recorded at 3.4% and 99% respectively at the close of June'19, against 3.7% and 97% respectively as at end of December 2018; significantly outperforming the March' 19 industry ratios of 8.2% and 84% respectively as well.
Remaining fully cognizant of the evolving business dynamics, total borrowings were reduced to 10% of total assets which stood at Rs 1,319,942 million as at June 30, 2019.
Accumulation of no and low-cost deposits remained a key objective of the bank during the period under review. Thereby, non-remunerative deposits grew by 8% against December 2018 to close at Rs 392,502 million; constituting 38% of Total Deposits mix of the bank as at end of June 2019. The bank's Total Deposits also grew by 5% from December 2018 end to close at Rs 1,028,989 million.
The bank maintained its healthy equity base, which closed at Rs 107,608 million at the end of June 2019. Capital adequacy ratio of the bank also stood at robust level of 21.5% against the statutory requirement of 11.9%; which is reflective of the strong capital positioning of the bank.-PR