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The dividend payout by some banks lower due to issue of bonus shares

By SHABBIR H. KAZMI
Mar 11 - 17, 2002

The financial results for the year 2001 released by commercial banks indicates good results despite economic slow down, barring a few. While meeting the enhanced capital requirement may not pose a serious problem for most of the banks, dividend payout is expected to be lower due to issue of bonus shares. However, this will have a positive impact on future earnings of the banks as well as improve their balance sheet footing.

Askari Commercial Bank posted over one billion rupee profit before tax and improved its payout compared to dividend paid in year 2000. The Board of Directors approved payment of 20 per cent dividend and issue of 5 per cent bonus shares subject to approval of the SECP.

Bank Alfalah may rightly term year 2001, 'another year of remarkable performance and another year of consistent growth'. To substantiate their claim they can refer to, 47 per cent growth in deposits, 24 per cent increase in advances, 31 per cent growth in profit before tax and 44 per cent hike in profit after tax as compared to previous year. At the end of the year equity of the bank also stood at Rs 1.361 billion, a growth of 51 per cent over the previous year.

Faysal Bank has able to wipe out its accumulated losses over the last two years. Over the last two years it not only succeeded in cleaning its slate but also managed to pay 10 per cent dividend (amounting to Rs 151 million) for the year 2001 by transferring Rs160 million from contingency reserve. There was improvement in mark-up as well as non-mark up income. The management was able to control expenses, though there was slight increase in administrative expenses. There was also improvement in basic earning per share — from Rs 1.53 to Rs 1.82.

Habib Bank earned Rs 2.2 billion profit before tax for the year, almost double the amount posted for the previous year. This was despite the fact that the bank made provisions amounting to Rs 2.6 billion as compared to Rs 1.2 for the year 2000. Profit after tax of Rs 1.1 billion was more than double the amount posted for the previous year. The bank also managed to curtail administrative expenses. Deposits increased, though by 7.6 per cent only. There was also reduction in non-performing loans. The bank has increased lending to SMEs. At the same time, overseas operations improved and contributed to higher profit. Yet another improvement in service was 61 ATMs, of its own, and over 100 machines through sharing with other banks.

Metropolitan Bank posted Rs 742.7 million profit before tax as compared to Rs 567.9 million profit for the year 2000. Out of Rs 338 million profit after tax, Rs 200 million were appropriated for issue of bonus shares. Rs 175 million bonus shares were also issued in year 2000.

Muslim Commercial Bank is the largest private sector bank and the third largest bank of Pakistan. The year 2001 was yet another year of achievements. The bank posted over Rs 2.1 billion profit before tax and total dividend payout for the year 2001 was 25 per cent.

PICIC Commercial Bank (formally Gulf Commercial Bank) completed the first successful year of operations since the acquisition of by Pakistan Industrial Credit and Investment Corporation (PICIC). The various structural and financial changes introduced, yielded positive results. Some of the indicators of improvement were, a hefty 153 per cent growth in profit before tax and 79 per cent increase in deposits. The Board of Directors approved issue of 25 per cent bonus shares and 40 per cent right shares to further improve the balance sheet footing.

Platinum Bank incurred over Rs 87 million loss before tax for the year as compared to Rs 145.7 million profit after tax for the year 2000. Since the details are not given in the announcement it is not possible to ascertain the reasons for posting loss.

Prime Commercial Bank was able to improve earnings per share due to higher income, though there was also increase in expenses. The bank posted Rs 241 million profit before tax as compared to a profit of Rs 158.6 million for the previous year. Out of Rs 152.6 profit after tax Rs 122 million were transferred to revenue reserve and the Board of Directors preferred to skip dividend payment.

Union Bank posted a meager Rs 9.95 million profit before tax for the year 2001. A closer look at the information reveals interesting facts. Out of an interest income of Rs 597.5 million provision against non-performing loans and advances amounted to Rs 197.6 million. While interest income amounted to Rs 597.5 million non-interest income amounted to over one billion rupee. An interesting observation was that out of total income of Rs 1,064.6 million, Rs 1,040 million went towards administrative expenses.

Though, analysts term commercial bank performance satisfactory, they also forecast about year 2002 to be a difficult year due to shrinking spread. The central bank has been not only lowering discount rate but also persuading commercial banks to curtail average lending rates. Since the demand for funds has not increased significantly, shrinking spread is affecting profitability of banks negatively.