NBP Records Rs49bn Pension Cost
Staff Report:
The National Bank of Pakistan (NBP) held its corporate briefing on Wednesday to discuss its 1H2024 financial results and future outlook.
NBP has recorded a pension cost of Rs49bn in 2Q2024, in line with the Supreme Court’s decision. There are no significant remaining amounts related to previous pension costs. However, there will be recurring pension costs.
While management did not disclose the exact amount, they indicated that the recurring cost would be roughly half of what was previously accounted for, i.e., Rs13bn, with appropriate disclosures to be made in due course.NBP Funds: Investors’ Guide to invest in Stocks
One pending pension case remains against NBP, where a few employees went to court for an increase in pensions as announced by the federal government in previous years, according to the Civil Services Act. However, the bank is confident that the decision will be in its favor, based on past rulings where NBP employees were not considered federal employees and NBP did not fall under the Civil Services Act.
Despite recording the pension cost, the Capital Adequacy Ratio (CAR) of the bank is 24.72%, significantly higher than the SBP requirement.
The decision on dividends will be made by the board, considering growth strategies and the availability of capital.
Management clarified that, as per the NBP Act, the bank can only announce dividends along with the final year-end results. The bank is also required to obtain SBP permission before announcing a dividend.
Currently, the bank holds OMOs of Rs2.4trn, earning a positive spread of approximately 0.5%.
The Advances to Deposit Ratio (ADR) of the bank stands at 37.5% as of June 2024. Management stated that they are working to improve it to a target level of 50% to avoid the additional tax. They also highlighted that the 40-50% threshold is well within reach and could be easily achieved.
NBP has provided strong provisioning of up to 96% against stage-3 loans, and adequate provisioning has been made against stage-1 and stage-2 loans.
NBP is actively working to widen its product portfolio, with management expecting to introduce credit cards in 2025.
NBP has sold its 45% stake in United National Bank Limited UK (UNBL UK), recording a capital gain of around Rs6bn.
The leverage ratio of the bank stands at 3.1% as of June 2024, which is close to the SBP-recommended level of 3%.
Of the total PIBs amounting to Rs3.3trn, 80% are floating-rate PIBs as of June 2024.
Management informed that in phase 1, around Rs100bn of deposits have been diverted to the Treasury Single Account (TSA).
Going forward, NBP’s focus will remain on revamping the existing branch network to enhance the customer experience. So far, 200 branches have been revamped.
NBP will also focus on improving its IT system to upgrade (1) Core Banking Applications, (2) Digital Offerings, and (3) Cybersecurity.
