BoK profits fall by more than 50% after attempted expansion 

Bank’s expansion plan coupled with troubled economy hindered its profitability for the year

PESHAWAR: The Bank of Khyber (BOK) continued to suffer one more in a string of bad financial years with profits falling by more than 50%. Net income declined by 59% year-on-year from Rs. 1,104 million in 2021 to Rs. 455 million in 2022. Profit margin for the year declined from a double digit of 14% in 2021 to a single digit of 5% in 2022.

The hit on profitability was mainly due to the bank’s expansion plans. Since 2019, the bank has been opening new branches to reach more customers. The number of branches has increased by 7% year-on year from 216 in 2021 to 231 in 2022 and by 38% as compared to 2019 from 168 branches in 2019 to 231 branches in 2022. Consequently, operating costs have increased by a whopping 26% on a yearly basis from Rs 5,295 million in 2021 to Rs 6,650 million in 2022. 

Moreover, profitability during the year has been impacted by a significant increase in the interest rate on the bank’s fixed rate investment portfolio which resulted in the bank paying more money to its investors.

Details of the financials 

The bank’s net income jumped up by 9% from Rs 7,812 million in 2021 to Rs 8,533 million in 2022. The increase was because of a surge in profits in foreign currency and income through bank charges. Income from foreign exchange increased by 38% from Rs 478 million in 2021 to Rs 660 million in 2022. However, the volatile stock market owing to the country’s deteriorating economic conditions decreased profits from investments in the stock market resulting in reduced income for the bank. The annual report shows that dividend income declined by a massive 192% (Rs 25 million) in 2022 from Rs 38 million in 2021 to only Rs 13 million in 2022. 

Despite a 9% increase in total income, the profitability of the bank took an adverse turn by declining by 59%. Profit before taxation declined by 45% from Rs 1,680 million in 2021 to Rs 920 million in 2022. According to the BOK’s annual report, earnings per share (EPS) also declined by 60% from Rs 1 in 2021 to Rs 0.41 in 2022.

Furthermore, the bank’s profit was also affected by providing more loans than its limit allowed by the provincial finance department, resulting in the loss of some institutions. Non-performing loans increased by 12% from Rs 10,521 million in 2021 to Rs 11,756 million in 2022, an increase of Rs 1,235 million. 

Looking forward, the bank has been investing in building its capacity to grow its business which should enable a sustainable increase in profitability in the coming year. It is also looking to diversify its financing portfolio by gradually moving from government backed lending to the private sector for fresh loans with potential of ancillary business and trade finance opportunities. 

 

Aziz Buneri
Aziz Buneri
Aziz Buneri covers financial, social, political and regional issues for Pakistan Today and Profit. He can be reached at [email protected]

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