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BankIslami gravely seeking improvement in consumer and auto financing; profits on the rise

BankIslami Pakistan Limited was structured in Pakistan as a public limited company on October 18, 2004 under the Companies Ordinance, 1984 to carry out the business of an Islamic Commercial Bank in accordance with the rules of Islamic Shariah.

The State Bank of Pakistan (SBP) granted a ‘Scheduled Islamic Commercial Bank’ license to the Bank on March 18, 2005. BankIslami Pakistan started its operations as a Scheduled Islamic Commercial Bank with effect from April 07, 2006, on receiving Certificate of Commencement of Business from SBP under section 37 of the State Bank of Pakistan Act, 1956.

The Bank is mainly engaged in corporate, consumer, commercial, retail banking activities and investment activities. BankIslami Pakistan is operating through 317 branches including 124 sub branches as at September 30, 2016 (Dec 31,2015: 317 branches counting 124 sub branches).

The shares of the Bank are listed on the Pakistan Stock Exchange Limited (PSX). The Pakistan Credit Rating Agency (Private) Limited (PACRA) has maintained the Bank’s long-term rating as ‘A+’ and the short-term rating as ‘A1’.

FINANCIAL PERFORMANCE
GROWTH RATE (%) (Sep-16 to Sep-15)
Total Deposits
6.87%
Total Assets
6.78%
Total Financing
42.44%
Total Investments
70.78%
Shareholder’s Equity (including revaluation)
10.19%
Basic Earnings per share – rupees
227.78%

Company experts have recorded, the deposit size of the bank has risen by Rs10 billion during the nine months closed September 30, 2016 i.e. 6.87 percent growth as against to same period last year. The deposit mix has also enhanced during the period and constituted 70.53 percent (Sept 2015: 69.30%) of the Current and Saving Accounts (CASA) due to which the cost of fund has fallen by 154bps.

The financing book has also enhanced by 42.44 percent (Sept 2015: 32.79%) with financing to deposit ratio improved to 52.51 percent (Sept 2015: 39.40%), which slightly enhanced the gross spreads. The net spread after provisions has also improved to 64.88 percent (Sept 2015: 44.43%) chiefly because of reversals of provisions in financing & investments portfolio.

REGION WISE BRANCHES (December 31, 2016)
Province/Region
Total Number
Share (%)
Punjab
1,148
49.4
Sindh
705
30.4
KPK
248
10.7
Baluchistan
99
4.3
Gilgit Baltistan
10
0.4
FATA
9
0.4
Federal Capital
68
2.9
AJK
35
1.5
Total
2,322
100.0

The management of the Bank has focused on improving its consumer financing portfolio mainly auto finance to attract higher yields in a low interest rate environment. The consumer financing portfolio has increased by 32.31 percent during the nine months closed September 30, 2016. The non-funded income of the Bank has enhanced by 16.07 percent supported by 11.27 percent rise in fee income. All this led to the growth in bottom line (profit after tax) of the Bank that has enhanced to Rs595 million for the period closed September 2016 as against to Rs135 million registered in corresponding period last year. Despite of this improvement, operationally, the Bank remained stretched because of acquisition of the defunct KASB Bank. It is expected that this process will continue till end of this year when the new branches acquired and those re-located will start contributing to the profitability.

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