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Askari pays 17.5 pc dividend despite 21.4 pc fall in profit

RECORDER REPORT

KARACHI: Askari Bank's profit in 1999 fell by 21.4 percent, to Rs 282 million, as compared to Rs 359 million of the previous year. However, it paid a cash dividend of 17.5 percent.

The declining yields on treasury bills, coupled with reduction in lending rates, was the main reason behind the 10.5 percent dip in net interest income, from Rs 965 million in 1998 to Rs 864 million in 1999. A 5.4 percent reduction in non-interest income, despite curtailment in operating expenses, to just 3.5 percent increase, as against 23.4 percent growth last year, resulted in further erosion in the bottom-line.

A leading analyst of a brokerage house said that a drastic reduction in exposure in government treasury bills from 57.2 percent in 1998, to 35.6 percent in 1999, was a timely move by Askari's management.

With the yields on treasury bills declining by more than 300 to 400 basis points for the last one year and further 200 basis points, reduced the expected yield in the coming months, over-exposure in government securities would impair the bank's ability to recoup its deteriorating financial health.

Instead, focus has been shifted to aggressively expanding the size of the bank's loan book, with its credit expansion increasing by almost Rs 3 billion in the current year, from 43.3 percent deposits in 1998 to 53.6 percent in 1999.

Sabiha Rizvi, of ABN AMRO Equities, said that following the bigger players, consumer banking activities seemed to be the buzz-word in the banking circles. Like MCB, Askari is working on setting up a new department to handle retail banking activities for the bank due to higher margins on consumer banking products which will help compensate for the declining interest rates in the economy.

She added that the bank would be re-launching its credit card in April to create a new and improved image in the market. The hardware and software for credit card division have been imported from abroad to ensure better services to the customers in the future. Other consumer banking products are also in the pipeline and will be launched in due time.