Review of NBP's quarterly report.

Byline: S. Kamal Hayder Kazmi

Analysis of Quarterly Report of National Bank of Pakistan (NBP) published September 30, 2020 showed that during the Covid-19 pandemic, the Bank's focus is to sustain its income streams also asset quality, while creating liquidity for its clients so that the workers continue to get paid their wages and businesses carry on their operations uninterruptedly.

The financial experts of NBP also explained that given the Bank's systemically significant role in Pakistan's financial system, the management of the Bank has to ensure its resilience to shocks while continuing to support the communities it serves.

The report also showed that because of continuation of factors dominated through pandemic, Pakistan's GDP growth rate reduced to -0.4 percent in FY20 and is now projected to increase approximately 2 percent in FY21 as business confidence has enhanced and demand indicators are explaining an uptick. Triggered through a hike in food prices, headline inflation accelerated to 9.0 percent in September 2020, averaging 8.8 percent during first quarter of FY21.

Financial Performance (Rs `Bn)

Details###Sep `20###Sep `19

Total Revenue###107.57###79.43

OPEX and OtherCharges###45###41.36

Profit before-provision###62.57###38.07

Provisions/Write-off (Net)23.3###8.89

Profit before-tax###39.27###29.18

Profit after-tax###26.13###16.33

The State Bank of Pakistan and the present Government of Pakistan have taken initiatives to keep inflation well-anchored within the proclaimed range of 7 to 9 percent during FY21.

The current account recorded a surplus of USD 792 million for the first quarter as against to a deficit of USD 1,492 million during the corresponding period previous year. This was reflective of the rise in home remittances to a record USD 7.1 billion in Q1-FY21, 31 percent higher than Q1-FY20. This helped in replenishing SBP's forex reserves to the pre-pandemic level of around USD 12.8 billion. Prioritising growth and employment, SBP has encouraged private sector credit through gradual reductions in the policy rate by a total of 625 bps from 13.25 to 7.0 percent and by permitting many refinance facilities. The report also explained that during this period private sector credit demand remained low and the banking sector advances registered a 2 percent drop from the December '19 level. As deposits grew through 15 percent, the banks opted to invest in government securities.

Asset quality has, however, emerged as a main concern as...