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Pakistan National Bank Net Income Rises 80 Percent on Lower Debt Provision    
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By : Farhan Sharif , Bloomberg

National Bank of Pakistan, the country’s biggest lender by assets, said second-quarter profit rose 80 percent after it set aside less cash to cover bad debts.

Net income on a consolidated basis totaled 3.63 billion rupees ($42.5 million), or 2.70 rupees a share, compared with 2.03 billion rupees, or 1.51 rupees, a year earlier, the Karachi-based lender said in a statement to the stock exchange today. Revenue climbed to 12.6 billion rupees from 8.9 billion rupees.

“Slow growth in income was overcome by lower bad-debt provisions, helping net profit rise,”Raza Khan Niazi, research analyst at Invisor Securities Ltd., in Karachi, said before the announcement. He has a “buy” recommendation for the stock.

Pakistan’s central bank began requiring lenders to set aside more funds to cover delinquent loans in October 2007. It eased those rules in January 2009, allowing banks to use 30 percent of the value of assets provided as collateral to meet requirements for provisions against defaults, and in October 2009 increased the proportion to 40 percent.

The bank’s provisions for loan defaults and write-offs on bad debts fell to 936 million rupees in the second quarter from 3.48 billion rupees a year ago, according to the statement.

The lender, which has the highest loan delinquency ratio in the nation, plans to boost profit by recovering more funds from borrowers as an economic slowdown and terror attacks damp growth prospects.

“Our non-performing loans are a war chest for our investors,” Chief Executive Officer Syed Ali Raza said in an interview on March 16. “We always had a very passive approach to recoveries, of depending only on the courts; now we have a menu of solutions. Recoveries are our No. 1 priority.” National Bank fell 4.3 percent to 62.90 rupees at 12:43 p.m. on the Karachi Stock Exchangetoday. The stock has advanced 5.9 percent this year.

Net income in the first six months of 2010 rose to 7.88 billion rupees, or 5.86 rupees a share, from 6.32 billion rupees, or 4.70 rupees, a year earlier, according to the statement. Revenue in the six months advanced to 24.8 billion rupees from 20.5 billion rupees.

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