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Wednesday, 26 September, 2012
ADvAncing woefully g
Non-performing advances to add to banks’ bad debts despite improved core activities
48-member Malaysian delegation to attend Expo Pakistan ISLAMABAD APP
KARACHI
D
STAFF REPORT
ESPITE the economic slowdown and ever worsening law and order situation in the country, the cumulative advances of banking sector sample, consisting of 33 commercial banks, during 1HCY12 rose by an impressive seven percent as against Dec-11, said a report issued by InvestCap Research Monday. According to the report, during the review period total advances of the country’s banking sector sample were seen to bolster on the back of exuberant loan disbursement by Big 5 tier, local mid tier and local lower tier banks, growing by 8 percent, 7 percent and 6 percent respectively. In addition, it said, contribution of the foreign private banks tier was limited as their advances grew by mere one percent during 1HCY12. “In the absence of any details of advances, we assume the up tick witnessed was due to additional borrowings done primarily under the sub head of advances to power sector, due to ever growing quantum of circular debt coupled with loans disbursed
to textile sector because of the export refinancing phenomenon,” said InvestCap analyst Asad I. Siddiqui. This assumption, Asad said, was based on figure of Dec-11 financial statments of our sample in which
the above mentioned sectors had major contribution in advances. Conversely, financings (advances) of the Islamic banking tier contracted by 7 percent during the period under review (minor Rs10bn in monetary terms), which can be attributed to risk averse nature of their business. With increasing advances, rise in non-performing loans (NPLs) had been
witnessed as well, up by 3 percent. However, the rise under the said head was at a slower velocity as compared to rise in advances, suggesting the weak pace at which rolled over NPLs have been moving. As a result, net infection of our banking sector sample has also shrunk by minor 20bps, the net infection ratio at 5 percent during the period under con-
sideration. Furthermore, impressive reduction of 130bps in the asset infection level of lower tier banks had been seen. However, the net infection ratio was still 1.8 times above than that
of the banking sector sample, settling at 11.9 percent. It was more or less the same scenario existed with local mid tier banks, as their net asset infection was recorded at 8 percent during 1HCY12. This highlighted the fact that local mid tier and local lower tier banks have less access to advances of healthy nature. Due to the nature of our banking system, where virtually 50 percent of all the major heads of the banking sector rests with the big 5 tier, mid and smaller sized banks were forced to lend out at lesser rates to make themselves attractive and have more risky lending options as compared to the big 5 tier. Continuous reduction in the discount rate coupled with saving deposits being fixed at 6 percent, investment in government’s papers was becoming less attractive with the passage of every monetary policy. This would leave banks with 2 alternatives: To shift focus towards core banking activities and go for the riskier option or to remain heavily invested in government securities and end up earning a lesser spread. “In either case, we expect the NonPerforming Loans to rise by the end of the year, fueled by the non performance of freshly released advances,” said Asad.
AGENCIES
Europe must take ‘deep breath’ and enact reforms: Merkel BERLIN Chancellor Angela Merkel said on Tuesday that Europe could only hope to come out of its crisis stronger and compete in a globalised world if its members pressed ahead with painful reforms and moved to more responsible budget policies. Speaking at a meeting of the Federation of German Industries (BDI), Merkel acknowledged that Germany was “not an island” that could disconnect from economic developments in Europe and the world economy. But she placed the onus on Berlin’s struggling euro zone partners to fix their own economies, rejecting the idea that Germany should relax its own productivity drive in order to help its partners. “We need to take a deep breath to overcome this crisis,” Merkel said. “We must make the efforts that will allow Europe to come out of this crisis stronger than it went in.” “There is a lack of confidence on financial markets that some euro zone states can pay back their debts in the long term,” she continued. “The world
wonders how competitive euro zone countries are.” The German leader said tough reforms in southern Europe had led to some convergence of unit labour costs across the euro zone, but made clear that there was still work to do. She also expressed regret that the European Court of Justice had not been given stronger powers to intervene in national budget policies in the euro zone. “We can’t have support without controls. The two go hand in hand,” Merkel said. The German economy has held up well during the crisis, with unemployment holding near post-reunification lows. But there are signs t h a t e c o nomic
weakness across much of Europe and a slowdown in Chinese growth are beginning to bite. Business sentiment is at its weakest level since early 2010, data released by the Ifo economic think tank showed on Monday. And some economists believe Germany could fall into a technical recession in the second half of this year. “NOT AN ISLAND”: “We are feeling that Germany is not an island. We are an export nation. Forty percent of our exports go to the euro zone, 60 percent to the European Union. We can’t disconnect from European and global economic developments,” Merkel said.
Merkel held up the fiscal compact for budget discipline and plans to introduce pan-European banking supervision as signs of Europe’s progress. She dismissed the notion that Berlin was slamming on the brakes in the creation of a European banking watchdog. In recent weeks, the German government has made clear that it sees a January deadline for putting this in place as unrealistic. “We want stronger European banking supervision,” she said. Merkel was due to meet European Central Bank President Mario Draghi on Tuesday afternoon. Later he will give a speech to the same industry conference. Draghi’s plan, unveiled at the start of the month, to buy the bonds of struggling euro countries, combined with a green light from Germany’s Constitutional Court for Europe’s new rescue fund have been welcomed by markets. But worries have grown in the past week over Spain’s reluctance to seek a bailout that would allow it to profit from the ECB’s bond plan. Also weighing on the euro on Tuesday was a report that lawyers at the German Bundesbank were looking into the legality of Draghi’s bond scheme.
ASHGABAT IS ALL GEARED UP! ‘Turkmenistan ready to meet Asia’s growing demand for natural gas’ ASHGABAT ONLINE
Construction of TurkmenistanAfghanistan-Pakistan-India (TAPI) gas pipeline will meet the rapidly growing needs of the Asian energy market, Turkmen President Gurbanguly Berdimuhammadov said on Tuesday. “Laying this transnational gas pipeline will allow to meet the rapidly growing needs of the Asian energy market through the export of Turkmen natural gas, as well as address a number of important social and humanitarian is-
sues, including those related to the creation of new jobs, formation of the appropriate infrastructure along the gas pipeline,” the report said. The meeting heard a report on the outcome of the TAPI Steering Committee’s meeting held in Ashgabat, which was attended by sector ministries and representatives of all participant countries of the project, as well as the Asian Development Bank (ADB). The meeting discussed the results of the business tour to Singapore, New York and London in mid-September, in order to attract the leading oil and gas compa-
nies and financial institutions to the consortium, which will be created for the implementation of this major project. Turkmen leader stressed that “the construction of the TAPI will not only guarantee further economic growth of the participant countries of the project, their social well-being, but also, more importantly, will help maintain peace and strengthen political stability throughout the region”. The basic document for promoting TAPI was the intergovernmental agreement signed by participating countries in Ashgabat in late 2010 to start implement-
Asian shares ease as growth worries weigh TOKYO
Deep breaths everyone AGENCIES
A 48-member strong delegation of Malaysian entrepreneurs and businessmen is scheduled to attend the 7th edition of Expo Pakistan to be held in Karachi from October 4-7. “The participation of such a large delegation from Malaysia which had the largest foreign representation in Expo Pakistan last year as well, is a clear manifestation of the trust and confidence the Malaysian business community has in the Pakistani market and I am sure the visit would pave way for more business matchmakings and economic collaborations,” said Acting High Commissioner for Pakistan to Malaysia Mohammad Nadeem Khan while addressing a pre-visit briefing arranged by the Commercial Section of the Mission for the Malaysian delegates here in Kuala Lumpur. Nadeem told the Malaysian delegates that the Expo Pakistan 2012, held every year at Karachi Expo Center, was “the premier trade fair in Pakistan, which showcased Pakistan’s trade and manufacturing potential”.
ing the project. Important agreements on TAPI were signed for the purchase and sale of Turkmen gas with the State Gas Systems of Pakistan and Indian GAIL Ltd. The project cost was estimated at $7.6 billion as of 2008. Bangladesh expressed its interest in the project. Besides the Dovletabat field, the largest field being developed in Turkmenistan which was Galkynysh may be a resource base. Russia expressed great interest in this project. The U.S. administration also supported the implementation of this project.
Asian shares eased on Tuesday after sentiment was weakened by data showing Germany’s business confidence dropped in September, and a weak earnings forecast from Caterpillar Inc, both of which underscored worries about a global growth slowdown. Uncertainty about the bailout prospect for Greece and Spain, which are the two major risks in what has become the euro zone’s three-year-long debt crisis, also undermined investors’ risk appetite. The MSCI index of Asia-Pacific shares outside Japan inched down 0.1 percent. Australian shares were down 0.2 percent, and South Korean shares fell 0.3 percent. Tokyo’s Nikkei average opened down 0.4 percent, hitting a fresh one-week low. “The German data is just the latest sign of a global slowdown and is likely to drag on the market today,” said Toshiyuki Kanayama, senior market analyst at Monex. The German Ifo institute’s monthly business sentiment index fell for a fifth successive month in September to its lowest level since early 2010, with the outlook component touching its worst level since May 2009. “This lends support to the thesis that the weaker growth outlook is spreading to the EU core,” Barclays Capital said in a note. Caterpillar, the world’s largest maker of earth-moving equipment, cited weakness in the world economy when cutting its 2015 earnings forecast, raising the possibility of weak guidance from other firms as U.S. earnings reporting season approaches.
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growth concerns, Spain cap euro and share gains Stocks rose around the world on Tuesday, with US markets in particular buoyed by hopes of more economic stimulus from the Federal Reserve, though lingering concerns over Spain’s funding problems and renewed worries about global growth limited gains. g
NEW YORK
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AGENCIES
S stocks rose at the open after comments from the president of the San Francisco Fed suggested the central bank was not done taking action to stimulate
the economy. A pessimistic outlook from Caterpillar (CAT.N) capped gains and some investors cautioned the advance may be due to windowdressing for the end of the quarter. .N U.S. stocks were supported by a private sector report showing U.S. consumer confidence jumped to its highest level in seven months in September as Americans were more optimistic about the job market and income prospects. The MSCI world equity index .MIWD00000PUS rose 0.37 percent to 337.38. European shares .FTEU3 gained 0.26 percent. “A lot of people are buying equities today because they’ve been underexposed to the market. It isn’t necessarily a call on fundamentals,” said Nicholas Colas, chief market strategist at
the ConvergEx Group in New York. “Money managers who haven’t believed in the rally don’t want to compound that error by showing a lack of exposure at the end of the quarter.” The Dow Jones industrial average .DJI was up 49.96 points, or 0.37 percent, at 13,608.88. The Standard & Poor’s 500 Index .SPX was up 4.83 points, or 0.33 percent, at 1,461.72. The Nasdaq Composite Index .IXIC was up 9.82 points, or 0.31 percent, at 3,170.60. Caterpillar shares (CAT.N) fell 2.3 percent at the New York open. Just minutes before markets closed on Monday, Caterpillar Inc cut its 2015 profit outlook, warning that weaker commodity prices would result in a bigger-than-expected decline in demand. <ID: nL1E8KOGZR>. “Caterpillar is another global-reaching firm that’s speaking negatively to the pace of the economy, and with slow-downs in Europe and Asia, this is something we should get used to,” said Art Hogan, managing director of Lazard Capital Markets in New York. U.S. data showed single-family home
prices rose for a sixth month in a row in July, though the improvement was not as strong as expected and had minimal impact on trading. The benchmark 10-year Treasury note yield was last at 1.7181 percent, compared with 1.706 percent shortly before the release of the home price report from S&P/Case-Shiller. The euro rose 0.2 percent at $1.2951, still some two cents from the 4-1/2-month peak posted last week when the U.S. Federal Reserve announced further quantitative easing. Gains were sparked by a media report that Bundesbank lawyers were checking the legality of the European Central Bank’s bond-buying plan. Oil drew some support from the rise in tensions in the Middle East. Washington on Monday cleared the path for tighter sanctions against Iran to curb its nuclear ambitions, while Tehran renewed its rhetoric against Israel, intensifying worries about a conflict between the two, which could have an impact on crude supplies from the region. These worries sent Brent crude futures up 1 percent to $110.91 per barrel.
Cement rejoiCes at inflated priCes
Business 02 Major Gainers COMPANY Indus Dyeing Shezan Inter. Indus Motor CoXD Service Industries Pak Services
rest have not yet announced their full year results. We have excluded Javedan Corporation because being non operational during FY12,” said Topline, Analyst, Farhan Mahmood. The analyst said one of the turnaround stories for cement manufacturers in FY12 was sharp rise in local cement demand which led to improvement in cement prices at local arena. This led to handsome increase in total revenues by 33 percent to Rs123bn ($1.3bn). Where local volumetric sales remained higher by 9 percent to 24mn tons in FY12, local cement prices improved by an average 26 percent during FY12. However, total sales during FY12 (local + exports) stood at 32.6mn tons, up 4
HIGH 419.00 262.50 261.10 183.75 171.67
LOW 419.00 254.00 248.00 177.90 163.50
CLOSE 419.00 260.00 260.42 183.48 171.67
CHANGE 19.00 10.00 9.24 8.48 8.17
TURNOVER 100 3,100 65,700 12,100 900
9700.00 862.00 1021.00 324.00 1000.00
9400.00 862.00 950.01 295.10 950.00
9400.00 862.00 963.53 295.10 960.71
-300.00 -45.25 -20.47 -13.60 -9.29
180 50 300 300 550
19.62 9.14 8.34 6.06 48.11
18.88 7.91 7.45 5.92 47.30
19.36 8.78 8.11 5.99 47.86
0.42 0.60 0.10 0.05 0.32
11,376,000 7,247,000 7,137,000 5,310,000 5,174,500
Major Losers UniLever Pak Siemens Pakistan Bata (Pak) Limited Island Textile Wyeth Pak Limited
9700.00 907.25 984.00 308.70 970.00
Volume Leaders P.T.C.L.A Maple Leaf Cement Pak Elektron Ltd. Fauji Cement D.G.K.Cement
18.94 8.18 8.01 5.94 47.54
Interbank Rates US Dollar UK Pound Japanese Yen Euro
94.5464 153.4488 1.2168 121.9459
Dollar East BUY US Dollar Euro Great Britain Pound Japanese Yen Canadian Dollar Hong Kong Dollar UAE Dirham Saudi Riyal Australian Dollar
SELL
94.50 121.35 152.21 1.2020 95.54 11.98 25.58 25.08 97.54
95.00 122.45 153.55 1.2126 96.89 12.15 25.78 25.23 99.85
Bulls lift LSE up 34.89 points LAHORE
Inflated prices increase profits of cement sector to Rs16bn in FY12 KARACHI: The profits of cement companies have increased seven times in FY12 to Rs 16 billion or $168 million due to robust increase in cement prices that witnessed a growth of 26 percent during the year. Interestingly, out of 10 companies which have announced their full year results, only one has posted losses in FY12 whereas last time almost 50 percent of the cement companies were in losses. Thus, better cement sector outlook and turnaround in FY12 led cement sector posting 119 percent return during 2012YTD as well. “Our sample includes 10 cement companies, representing 76 percent of market capitalization, while the
OPEN 400.00 250.00 251.18 175.00 163.50
APP
Lahore Stock Exchange on Monday witnessed bullish trend by gaining 34.89 points as the LSE-25 Index opened with 3987.58 and closed at 4022.47 points. The market’s overall situation also corresponded to an upward trend as it remained at 2.812 million shares to close against previous turnover of 2.472 million shares, showing an upward move of 340,400 shares. While, out of the total 102 active scrips, 22 moved up, 64 remained equal and 16 shed values. Muslim Commercial Bank Limited, Packages Limited and Pakistan Reinsurance Company were Major Gainer of the day by recording increase in their per share value by Rs 1.90, Rs 1.14 and Re 1.00 respectively. Pakistan Oil Fields Limited, Pakistan Petroleum Limited and Attock Refinery Limited lost their per share value by Rs 3.00, Rs 1.92 and Re 0.94 respectively. The Volume Leader of the day included Fauji Cement CompanyLimited with 500,000, Meple Leaf Cement Factory with 486,000 shares and NIB Bank Limited 284,500 shares.
percent. Thus, despite energy cost (higher prices of oil prices & gas), cement manufacturers’ remained comfortable with gross margin increasing by 7pps to 30 percent during FY12. However, 17 percent increase in financial charges to Rs8.7bn amid currency devaluation and higher borrowing (particularly in 1H) slightly diluted bottomline. “Thanks to sharp rise in cement prices, profits of Kohat cement grew by massive 26 times followed by DG Khan Cement (up 24 times) whereas most of the companies which had operational issues due to high cost of production and high leverage, their losses turned into profits in FY12,” said Farhan. STAFF REPORT
CORPORATE CORNER Rs 360 million released for Darawat dam project LAHORE: The Federal Government released Rs 360 million for the under-construction Darawat Dam Project, located in Thatta and Jamshoro districts. Following release of the much-needed funds, the construction work at site will gain a new momentum leading towards timely completion of the project. The funds have been released on the special instructions issued by Prime Minister Raja Pervez Ashraf, and because of the efforts made by Federal Water and Power Minister Chaudhry Ahmad Mukhtar for the purpose.
The Consul General of the Federal Republic of Germany Dr Tilo Klinner, and Mrs Luba Klinner, hosted a Jazz Concert and reception at their residence. Picture shows Goethe-Institute, Director, Ali Akhtar, Press and Political officer, Dr.Mohmmad Altamash, with artists Peter Weniger and Asif Sinan, with other guests.
NADRA, Chairman, Tariq Malik giving presentation to the delegation of the government of Gilgit Baltistan led by Chief Minister Syed Mehdi Shah at NADRA headquarters.
Etihad Airways offers special fares for Chicago LAHORE: Etihad Airways, the National airline of
browsing experience on the largest wireless broadband network in the country. The offer was valid on both 3G EVO Nitro Bundle Offer, where consumers can get a free Nitro dongle, plus 3 months unlimited usage, for just RS 6000 or on a purchase of a new Nitro Dongle. The monthly billing per month will be Rs 2,100 for one year.
COMSATS visits Lahore Stock Exchange as part of campus outreach program LAHORE: Students of COMSATS Institute of Information Technology visited the Lahore Stock Exchange as part of the Campus Outreach Program under Financial Literacy Initiative. Here, they were given an insight about practical aspects of various financial institutions and investment avenues by industry professionals.
PTCL brings 3G EVO Nitro Boost Offer
Intel Pakistan in partnership with KCCI holds ‘Intel SMB Technology Day’ ISLAmAbAD: Intel Pakistan in collaboration with the Karachi Chamber of Commerce and Industries (KCCI) held a full day event “Intel SMB Technology Day” to showcase latest technology solutions for increasing business productivity offered by Intel. The session was inaugurated by Intel Pakistan, Country Manager, Naveed Siraj, and KCCI, President, Abrar Ahmad.
the United Arab Emirates, offered an exclusive deal for Chicago. The customers can fly from Islamabad to Chicago at an amazingly low fare of Rs 127,110 which was available on tickets purchased between 24th September and 5th October, 2012. While these tickets can be availed any time before 31st of October – 2012.
ISLAmAbAD: In a continued commitment to bring modern telecommunication solutions at affordable rates for its valued customers, Pakistan Telecommunication Company Limited (PTCL) country’s leading telecommunication network, had reduced the monthly recharge by 30%, offering massive savings on its 3G EVO Nitro dongles. Now PTCL consumers can avail 9.3 Mbps hyper speed experience with 3G EVO Nitro at RS 2100/month for one year, while enjoying unlimited downloads, video streaming, and seamless
Dr Hasan Sohaib Murad, Dr A R Kausar, A G Ghaffari, Dr Faheem ul Islam, Dr Abdul Hameed, Dr Abdul Aziz Bhatti, Dr Munawar Anees, Dr Nabeel Amin, and Mohyuddin Tahir addressed the large gathering at the special welcome orientation ceremony organized by the University of Management and Technology (UMT), Lahore, for Fall 2012 newcomers
PJBF hails SEZ Bill KARACHI: Pakistan Japan Business Forum appreciated and applauded the signing of the muchawaited Special Economic Zones Bill 2012 by President Asif Ali Zardari as this landmark incentive was initiated by PJBF four years ago. This was stated by PJBF, Chairman, Sohail P Ahmed in a laudatory statement.
Wednesday, 26 September, 2012