FAYSAL BANK LIMITED

S.KAMAL HAYDER KAZMI,
Research Analyst
, PAGE
Sep 15 - 21, 2008

Faysal Bank Limited is a full service banking institution offering consumer, corporate and investment banking facilities to its customers. The Bank's widespread and growing network of branches in the four provinces of the country and Azad Kashmir, together with its corporate offices in major cities provides efficient services in an effective manner. In fact Faysal bank has the highest share capital amongst private banks in Pakistan and is amongst the largest in terms of equity. The strength and stability of Faysal Bank Ltd is evident through the Credit Rating assigned by JCR-VIS and PACRA of "AA" for long to medium term and "A-1+" for short term. The majority share holding of Faysal Bank is held by Ithmaar Bank B.S.C an investment bank listed in Bahrain. Faysal Bank plans to expand its domestic branch network in Pakistan and start a new Islamic division to take advantage of rising demand for Shariah compliant products and farm loans. The bank will increase its number of outlets to 150 by December 2009, and will start the Islamic banking unit next week. Faysal Bank, Pakistan's ninth-biggest, has 107 branches across the nation and plans to add 23 this year.

FINANCIAL HIGHLIGHTS

FINANCIAL HIGHLIGHTS

INDICATORS

FOR THE QUARTER ENDED

FOR THE SIX MONTHS ENDED

 

30-Jun-08

30-Jun-07

30-Jun-08

30-Jun-07

 

Rupees in million

Profit before taxation

476

926

1138

1856

Taxation

171

281

392

561

Profit after taxation

305

645

746

1295

Un-appropriated profit brought forward

599

1374

1482

1816

 

904

2019

2228

3111

Appropriations:

       

Final cash dividend 2007@25% (2006: @25%)

-

-

(1,324)

(1,059)

Transfer to Capital Market Reserves

-

-

-

(33)

Un-appropriated profit carried forward

904

2019

904

2019

Earning per share (Rupees)

0.58

1.22

1.41

2.45

Source: Faysal Bank Ltd

Net Mark-up Income representing the core banking activity has gone up by Rs. 192 million or 8.6% during the half year ended June 30 2008 primarily due to higher volume of financing and Investment in government securities. However, Non Mark-up income for the period shows decline of Rs.159 million to Rs.638 million. This decline is due to lower income from equity market caused by volatile / unfavorable stock market conditions. Further, last year the Bank had a net reversal in provision for non performing loans of Rs. 48 million whereas in current period there is a charge of Rs. 412 million. Administrative expenses have increased by Rs. 300 million or 25%, mainly due to the opening of 29 new branches, 6 services centers and annual salary increases coupled with inflation. Once the new branches complete their gestation period, the increase in business volumes and revenues would significantly improve the bottom line. Accordingly, the profit after tax for the quarter and six months ended June 30, 2008 stood at Rs. 305 million and Rs. 746 million as against Rs. 645 million and Rs. 1,295 million respectively, last year. This translates into Earning per Share (EPS) for the period of Rs. 1.41 versus Rs. 2.45 last year. Deposits have declined by Rs. 2.45 billion due to strategy of reducing reliance on hot institutional deposits and to optimize the deposit mix. Surplus on revaluation of investments has declined by Rs. 1.3 billion due to decline in unit price of NIT in line with stock index.

PROFIT RATES

Saving (Basic) Avg.Bal. Rs. 10,000

Rates

Rs.0 to Rs.25,000

5.00%

Rs.25,001 to Rs.100,000

5.00%

Rs.100,001 and above

5.00%

Rozana Munafa Plus (Individual)

Rs.0 to Rs.100,000

5.00%

Rs.100,001 to Rs.200,000

5.00%

Rs.200,001 to Rs.500,000

5.00%

Rs.500,001 to Rs.3,000,000

5.00%

Rs.3,000,001 to Rs10,000,000

5.00%

Faysal Premium (Ind. & Corporate) Avg.Bal.Rs.5M

Rs. 0 to Rs. 5,000,000

0.10%

Rs 5,000,001 to Rs.10,000,000

3.00%

Rs.10,000,001 to Rs.25,000,000

4.00%

Rs. 25,000,001 to Rs. 50,000,000

4.25%

Rs. 50,000,001 to Rs. 125,000,000

5.00%

Rs. 125,000,001 & above

5.50%

Cash Management Saving Accounts (Individual/Corporate)

Rs. 0 to 25,000

0.10%

Rs. 25,001 to Rs. 500.000,000

1.25%

Rs. 500,000,001 & above

2.00%

FAYSAL GROWTH CERTIFICATE

JUL-DEC 2007

MONTHS

PROFIT RATES

6

7.50%

12

7.90%

18

8.30%

24

8.70%

30

9.10%

36

9.50%

42

9.90%

48

10.30%

54

10.70%

60

11.10%

Source: Faysal Bank Ltd

CONCLUSION

The Faysal bank's profitability has decreased in FY 2007-08 as compared to the previous financial year. With challenges posed by the volatile political and economic conditions, the Bank is pursuing a managed growth approach without compromising the quality. Currently, the bank is looking to increase its investments by expending its branch network in various locations in the country. Faysal bank has also applied for a license for separate ŽIslamic banking Branches' under the prevailing rules. The bank plans to use Islamic products including cards and insurance. The bank will open seven Islamic banking branches this year, adding at least 10 more annually over the next three years. The existing branches of the bank under regular commercial banking license, continues to operate in strict compliance of SBP directives as regards to commercial bank. The bank also faces tough challenge with the introduction of new target set up by SBP to maintain the Minimum Capital Requirement (MCR).