Banks in 2006 continued to make huge profits, higher than last year. National Bank earned a profit-after-tax of Rs17.022 billion, MCB Bank Rs12.142 billion, United Bank Rs9.468 billion, Allied Bank Rs4.397 billion, Bank of Punjab Rs3.804 billion, Faysal Bank Rs2.817 billion, Askari Commercial Bank Rs2.250 billion, Habib Metropolitan Rs2.096 billion, Bank Al-Falah Rs1.763 billion, Bank Al-Habib Rs1.761 billion, Soneri Bank Rs985 million, PICIC Commercial Bank Rs969 million, Mybank Rs493 million and NIB Bank Rs126 million..

According to a report published in a national news paper by Shahid Iqbal. The listed banks’ earnings in 2006 grew by 32 per cent to reach Rs60.1 billion. This is lower than previous year in terms of percentage, but higher in terms of cash.

Last year banks posted a rise in profit by 40 per cent and 82 per cent in 2004 and 2005, respectively. However, banking spread remained the highest. The banking spread was 7.4 per cent. The average spread for the year 2005 was 6.3 per cent as compared to 4.1 per cent in the year 2004, an increase of 220bps.

In 2006, earnings growth of listed banks continued as their profitability went up by 32 per cent to Rs60.1 billion versus Rs45.6bn in 2005.

The profits were driven mainly by the rising net interest income of the banks which rose by 33 per cent to Rs115bn in 2006 as compared to Rs86bn in 2005.

This was in contrast with 2002 to 2004 net interest income increase where growth was mainly driven by rising advances of the sector.

In 2006, growth in net interest income came from higher spreads between lending and deposit rates of the banking sector.

According to the SBP data, banking sector average spread in 2006 went up by 110bps to 7.4 per cent while growth in advances during 2006 was 18 per cent or Rs365bn.

According to a research report prepared by the JS Research, a brokerage house, non-interest income of the banks grew by 29 per cent to Rs43.2bn.

Although major contribution came from fee income (36 per cent share in the total non-interest income), its growth remained subdued as it grew by only one per cent to Rs15.6bn.

Dividend income showed a growth of 60 per cent, driven mainly by the record payout by mutual funds and others corporate.

Dividend income of the banking sector rose to Rs7.1bn in 2006 and capital gain income of the sector declined by 12 per cent to Rs3.8bn from Rs4.3bn in 2005.

“This is the fifth consecutive year of positive profitability growth posted by the banking sector of Pakistan,” said the JS report.

However, depositors were neglected by the banks as they kept most of profits by themselves as reflected in the high banking spread.

Despite concerns showed at the top level in Islamabad, nothing went in favour of depositors. The governor of State Bank, Dr. Shamshad Akhtar, promised during the last month for the year 2006 to bring some correction for providing relief to depositors, but nothing changed.

Banks have started offering higher returns, but they want to engage deposits for a longer period, which a common small deposit-holder can’t afford