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National Bank may post Rs 1.2-1.4 billion six-month profit

KARACHI (September 15 2003): The National Bank of Pakistan is to announce on Monday financial results for the six months ended June 30, 2003, where analysts expect profit for the period to range between Rs 1.2 billion and Rs 1.4 billion, a growth of about 24 percent compared with corresponding period a year ago.

Despite fears, Pakistan banks' earnings are on the rise. And, NBP is no exception.

An analyst from Invest Capital expects NBP to post profit after tax of Rs 1.35 billion to Rs 1.4 billion (EPS Rs3.3-3.4) in 1H2003, a growth of 20-24 percent against Rs 1.13 billion in 1H2002.

Net interest income may post positive increase owing to low rates offered on deposits coupled with volume-based growth.

Moreover, capital gains and dividend income of NBP are also expected to surge.

NBP is expected to post a net profit of Rs 1.353 billion (EPS: PKR3.30), 19.6 percent higher than 1HCY02, said a report prepared by Zaheeruddin Khalid, head of research at Elixir Securities.

“We also expect the bank to announce a cash payout of 1 rupee per share.

The improvement in profits would mainly be on account of 400 bps decline in effective tax rate, 22.4 percent increase in non-interest income and 1042 basis points improvement in net interest margin.

“Going forward, we expect full year profits to be in the range of Rs 2.85 billion (EPS: 6.95).

The scrip offers 20 percent upside to our fair value estimate of Rs 59 per share.”

The main growth in profitability would come from a substantial 22 percent jump in non-interest income.

This jump in non-interest income would primarily arise from capital gains booked on bank's equity and bond portfolios.

Market rumours suggest that this capital gain could be outrageous and it could result in six months profit after tax to go as high as Rs 1.8 billion. “However, we are unable to substantiate this market claim and stick to our expectations of Rs 2.3 billion non-interest income implying a Rs 1.3 billion.”

NBP is also likely to witness an improvement in net interest margin during first half of 2003 due to a steeper decline in deposit rates as compared to the decline in lending rates.

This has been an industry phenomenon during 1HCY03; however, it is not expected to be repeated in second half of 2003.

Going forward NBP's share price is expected to witness slight pressure on account of the 3.2 percent public offering by government next month.

However, it is soon expected to recover on the back of strong fundamentals and cheap valuations.

The bank's pay-out for the year is expected to be around Rs 3.00-3.50 per share. This translates into a dividend yield of 6-7 percent.

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