Statutory tax rate to come down on banks in Pakistan
Pakistan Times Business & Commerce Desk

KARACHI: In the forthcoming FY07 budget, the statutory tax rate applicable on banks is likely to be reduced by another 3pps to 35%. The National Bank of Pakistan (NBP) on the back of a strong financial backup is continuously diversifying its product base by offering many consumer-based products to enhance its clientele base.

A big advantage is the bank’s position/status as the premier institution for the corporate sector and SMEs. Large branch network of the bank, particularly in every agriculture dominant area of the country, facilitates its aggressive strategy to focused on the rapidly growing agriculture sector of the country.

During FY05, the bank exceeded its loan disbursement target for the agriculture sector and has the largest portfolio in the sector. NBP’s FY06 profitability to solidify on the dual growth in net interest income and non-markup income it is expected.

Firm interest margins and steady advances growth are to contribute positively. Increased advances are to result from the bank’s focused lending strategy towards tapping the corporate sector and SMEs as well as the agriculture sector.

The financial results of NBP for the first quarter of the financial portrayed a 92% growth in earnings to Rs3, 612million (EPS: Rs5.09) as against Rs1, 884million (EPS: Rs2.66) during the preceding year. Net interest income after provisions depicted a significant 68% growth to Rs6, 581million as against Rs3, 914million during the corresponding period of last year. Interest earned was up 56% to Rs9.84bn.

The bank’s advances continued to rise on the steady economic upturn and higher monetary expansion.

Meanwhile, the non-interest income of the bank stood at Rs1.95billion compared to Rs1.66billion during 1Q/FY05. The 17% growth in non-interest income has ensued from higher level of fees, commission and brokerage income and higher gains on investments.

The administrative expenses of the bank depicted 19% increase to Rs2, 968million as against Rs2, 492million during the same period last year. The effective tax rate of the bank during 1Q/FY06 was nearly 4pps lower to 35% compared to 39% last year.

A mixed trend was witnessed in NBP’s balance sheet items during 1Q/FY06. Advances almost touched the Rs271billion mark, approx. 1% higher compared to the end-December 2005 level. Investments remained intact at Rs156billion. Deposits, on the other hand, declined by 1% to Rs457billion compared to Rs463billion previously.●