Research Analyst
Oct 3 - 9, 2011

Sindh Bank was incorporated on October 29, 2010 as a public limited unlisted company and got certificate of commencement of business from securities and exchange commission of Pakistan (SECP) on December 14, 2010. Banking license was issued by the State Bank of Pakistan to the Sindh Bank in December 2010. The State Bank issued certificate of commencement of banking business to Sindh Bank Limited (SBL) in December 2010 with simultaneous declaration of SBL as a scheduled commercial bank.

The Government of Sindh (through finance division), 100 per cent owner of SBL, injected Rs10 billion in the equity. Therefore, SBL is now in compliance with minimum paid-up capital requirement (MCR) prescribed by State Bank to be met by commercial banks until December 2013.


Paid-up capital 10,000,000
Equity 10,250,5866
Deposits 11,569,533
Investments 11,854,697
Revenue - Net 451,240
Non markup expenses 68,767
Operating profit 382,473
Profit before tax 382,473
Profit after tax 251,912
EPS 0.31

The Bank was able to post a pretax profit of Rs382.47 million during the four months period December 2010 to March 2011, as the major portion of the equity of the bank was received in last week of November 2010. The Placements transactions have been structured in such a manner that yields higher returns than the cost of deposits of the bank, with matching maturities.

The Bank has also been able to mobilize deposits to the tune of Rs11.57 billion, although major portion was received from various departments of government of Sindh. Administrative expenses are rising commensurate with the recruitment of staff. Key positions at head office have been filled in to remain compliant with the SBP’s requirements.

Some Elements of one time initial setup costs are included in admin expenses which, of course, will not recover in future period, and once the initial branch opening phase is completed the admin expenses will taper off to a smooth.

The Earning per share for the period ending March 31, 2011, taking weighted average outstanding number of shares, was Rs0.31: reflecting an annualized EPS of Rs0.86. JCR-VIS, a premier rating agency, has accorded long term entity rating of the bank as AA- with a stable outlook, and a short term rating of A-1.


The Listed banks revealed that cumulative profit of banking sector rose by Rs8.1 billion to Rs47.3 billion in January-June of 2011 compared with Rs39.3 billion in same period of last calendar year.

The massive surge in profit was driven mainly by higher net interest income (NII) and non interest income on account of higher fee income. It was estimated that a 20 per cent year on year (YoY) rise was witnessed in NII and at the end of June, NII stood at Rs151.4 billion, primarily driven by higher Kibor in first half of 2011 and growth in earning assets, particularly investments.

Non funded income, too, grew 17 per cent to Rs48.0 billion, as fee income, because of increase in commissions from remittances and trade business that rose by nine per cent to Rs22.4 billion.

Loan losses soared 24 per cent YoY during January-July on account of new accretions and a downward shift of older NPLs.

Impact of rising inflationary pressures has also seen as administrative expenses surged 17 per cent YoY to Rs92.7 billion in first half of 2011.

High increase in NII was primarily due to robust growth in earning assets especially investments, higher Kibor and strong spreads. Investments for the entire sector saw growth of 20 per cent during the period, which supported the growth in NII while average spreads remained higher by 25bps.



(a) (b) (a-b)
CY01 11.2 6.1 5.1
CY02 8.7 4.3 4.5
CY03 5.7 2.0 3.8
CY04 5.0 1.5 3.5
CY05 7.5 2.6 5.0
CY06 9.1 3.9 5.2

The SBP's tightening stance in second half of 2010 kept average Kibor up by 140bps YoY to 13.73 in the first half of 2011. Among the top and mid tier banks, MCB, HBL, ABL, and FABL recorded impressive double-digit growths of 26 percent, 19 per cent, 17 per cent and 67 per cent respectively.

However, during the period under review loan losses grew significantly 24 per cent YoY to Rs27.6 billion. New NPL accretions and downward shift of older NPLs led to rising loan losses out of the big five banks. Only ABL was the exception as its loan losses actually declined 42 per cent YoY while the remaining banks reported a growth between 18-61 per cent.

Moreover, rising admin expenses continued to put pressure on the profitability, as admin expenses rose by 17 per cent YoY to Rs92.6 billion in response to inflationary pressures.


Sindh Bank will spur growth and development of trade and industry across the country, particularly in the province. Sindh Bank will empower the people, especially women entrepreneurs to have access to banking facilities. By providing a wide range of financial services including microfinance solution, the bank will enable Sindh to play a greater role in the economic development of the country.