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Karachi: Two leading Pakistani banks announced falls in 2007 full-year net profit on Thursday, which analysts attributed to revised regulations that force them to more fully account for bad loans on their balance sheets.
Habib Bank Ltd (HBL), the country's third largest bank, reported a 14.2 per cent fall to Rs10.84 billion ($172.22 million) for the year ended December 31, down from Rs12.7 billion the previous year.
Pakistan's fifth largest bank, United Bank Ltd (UBL), reported a 11.3 per cent fall in its profit to Rs8.4 billion ($133.46 million), down from Rs9.47 billion in 2006.
"The decline in both banks was due to the additional provisioning done by the banks after the central bank tightened its provisioning regulations," said Atif Malik, an analyst at JS Global Capital Ltd. "Without the additional provisioning, the banks would have continued to post good growth in earnings."
Big provisions
HBL said its provisions and write-offs totalled Rs7.82 billion in 2007 compared to Rs2.93 billion a year earlier.
Analysts said this was unlikely to affect the banks' profitability in the coming months as banking spreads are expected to be around seven per cent and credit momentum is likely to pick up after elections on Feb-ruary 18.
On January 31, State Bank of Pakistan increased its discount rate by 50 basis points to 10.5 per cent, which analysts said would help further boost banks' profitability.
HBL and UBL announced 2007 cash dividends of 4 rupees per share and Rs3 per share respectively.
HBL closed up Rs1.40 at Rs274.50, while UBL ended Rs2.05 higher at Rs187.05, in a broader market which ended up 1.18 per cent.
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