Research Analyst
Sep 26 - Oct 2, 2011

Faysal Bank Limited (FBL) is a Pakistan-based company engaged in commercial, consumer, and corporate banking activities.

FBL is fully geared to meet the changing economic challenges. The bank is striving to build meaningful relationships with their customers and become partners in their growth and progress by acting as financial advisors, consultants, and financiers.

The bank operates in four segments: corporate finance, trading and sales, retail banking and commercial banking. Corporate finance includes investment banking such as mergers and acquisitions, underwriting, privatization, securitization, initial public offerings (IPOs) and secondary private placements.

Trading and sales undertakes the bank's treasury, money market, and capital market activities. Retail banking provides services to small borrowers namely consumers, small and medium enterprises and borrowers' agriculture sector.

Commercial banking includes loans, deposits, other transactions and balances with corporate customers. Effective December 31, 2010, the operations of Royal Bank of Scotland Limited (RBS Pakistan) were merged with the bank, which expanded the bank's footprint to over 225 branches all over Pakistan. During 2011, Barkat Islamic banking has more than doubled its footprint from 13 to 30 branches in 14 cities.

The bank is rationalizing the overlap of conventional branches by relocating them to other areas while utilizing their current premises for Islamic branches or as a second option choosing new sites. FBL participated in Rs500 million Syndicated Diminishing Musharaka transactions to a government entity engaged in supply of natural resources by partnering with corporate banking expertise.

Islamic banking has been given a new and distinct brand identity through its branch fascias, which will lend equity to the Barkat brand.

In 2010, RBS incurred a pre-tax loss of Rs2,937 million whereas FBL's profit before tax was Rs851 million, as such pre-tax loss of the two banks on combined basis was over Rs2 billion. FBL posted a profit before tax of Rs1.2 billion for the period Jan-June 2011 - a delta of more than Rs3 billion within six months of acquisition of the RBS Pakistan.

Furthermore, the markup earned for the nine months ended September 30, 2010 increased Rs872 million over corresponding period last year mainly on account of increase in financing volume. Deposits growth during nine months period was Rs8.8 billion resulting in an increase of Rs608 million in markup expenses.

Despite challenging economic conditions, provision against nonperforming loans was lower by Rs311 million over the corresponding period last year.

Non markup income for the nine months increased Rs256 million to Rs2,430 million mainly on account of capital gain on settlement of NIT LOC Holders' Fund of Rs1.7 billion.

Administrative expenses increased to Rs3,817 million from Rs3,153 million over the previous period. Reasons for this increase are opening of 11 new branches since September 2009, 2.5 per cent premium charged by NIT on settlement of NIT LOC holders' fund, higher inflation, and staff increments in March 2009 and 2010.

Accordingly, net profit after tax for the quarter and nine months ended September 30, 2010 was Rs74 million and Rs1,808 million respectively as against Rs451 million and Rs918 million for the corresponding periods last year. Currently, the bank's shares are listed on the Karachi, Lahore, and Islamabad stock exchanges. The Pakistan Credit Rating Agency Limited (PACRA) and JCR-VIS Credit Rating Company Limited have determined the bank's long-term rating as 'AA' and short-term rating as 'A1+'.

FBL acted as lead arranger for a project finance transaction for Pakistan's first wind power project. The bank was mandated to arrange local currency portion of a project finance facility to establish Pakistan's first coal, clinker and cement terminal at Port Qasim authority. A leading terminal operating company in Pakistan in collaboration with International Finance Corporation will establish the terminal.

The bank was also mandated to co-arrange syndicated term finance facility to set up a new sugar plant at Deharki in Ghotki district (Sindh) being sponsored by one of the most progressive industrial groups in Pakistan.

FBL was mandated as lead financial advisor and arranger to a syndicated working capital facility of up to Rs2.5 billion for a corporate farming enterprise. During the previous year, the bank had entered into a three year contract with the Pakistan Cricket Board, becoming the official sponsor of domestic cricket. During the current period domestic cricket's last event for the 2010-2011 season, the Faysal bank's super 8 T20 cup was held in Faisalabad. The event generated tremendous interest in the public; citizens of Faisalabad and its environs thronged the stadium in tens of thousands, while millions followed the games on TV and social media.


As part of FBL strategy of profitable growth, the bank has acquired controlling interest of Pakistan operations of the RBS Pakistan in 2010. This is a significant milestone for the bank as it complements their ambitious growth plans. RBS Pakistan provides a strong customer franchise and an excellent fit to Faysal bank's existing businesses.


Operating profit 1,404 2,162
(Provision)/Reversal for nonperforming advances 100 (609)
(Provision)/Reversal for diminution in value of investments (229) 6
  (129) (603)
Profit before tax 1,275 1,559
(Provision) / Reversal for taxation (481) 175
Profit after tax 794 1,734
Earning per share - Rupees 1.08 2.85