KARACHI: Earnings of the banking
industry grew by just one per cent in 2016, though analysts believe that even
this much increase was higher than expectations.
According to a JS Research report released on Monday, the
profitability of the JS Banking Universe, representing 83pc of the banking
sector market capitalisation, came in slightly higher than in-house estimates
as some banks booked reversals under “diminution in value of investments”
(largely related to oil stocks) in the fourth quarter of 2016.
However, the net interest income (NII) fell 7pc on the back of
declining benchmark rate and investment yields and hefty maturity of PIBs
during 2016, nullifying the impact of double-digit asset growth.
The non-interest income dropped 3pc year-on-year on lower realised
capital gains. Fee Income growth was recorded at 9pc, accounting for 50pc of
total non-interest income compared to 44pc a year ago.
The report expects NII to improve by 9pc during 2017, where
double-digit growth in fee income is also likely to support bottom-line growth.
The report anticipates lower accretion in non-performing loans
to cut down provisioning expenses by one-third of its historic average of Rs33
billion a year.
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