KARACHI - The profitability of the banking sector has plunged by 24 percent during the first quarter of calendar year 2009 amid substantial rise in banks provisioning against Non-Performing Loans (NPLs) and high impairment charges on equity portfolio. Financial results break-up of 23 listed commercial banks reveals that these banks witnessed double digit decline in the underlying profit as their Profit After Tax (PAT) amounted to Rs16.1 billion during Q1-2009 as against Rs 21.1 billion in the same period of last year. Banking and financial experts, however, expect asset quality of the banking sector to deteriorate further due to bottom-lines which will remain under pressure. Also, anticipated downward in both banks spread and loan book will also restrict the growth in Net Interest Income (NII) in quarters ahead. It is pertinent to mentioning here that most of the major listed banks have announced their financial results for the Q1-2009 except BoP, which has yet not conducted its board meeting to declare the result for the full year 2008. Out of 25 listed commercial banks, 23 banks announced their Q1-2009 results. These 23 banks carry a share of 87 percent in the total assets of the banking sector and 90 percent in the deposits. According to an analyst, NII of the banks registered strong performance and recorded an increase of 24 percent in the first quarter of 2009 to reach Rs 61.3 billion versus that of Rs 49.6 billion in the similar quarter of last year. The growth in NII was largely contributed by the increase in advances and improvement in Net Interest Margin (NIM). During January-March 2008, the banking sector spread was at 7.07 percent on average while in first two months of 2009 this has climbed up to 7.70 percent. Worth noting is that, during the first quarter of current calendar year, a minimum 5 percent profit on saving account is applicable, whereas it was not the case in the corresponding quarter of 2008. However, the rise in cost of fund was more than offset by the surge in yield on earning assets. Moreover, while advances of the banks dropped by 3 percent to Rs 3.06 trillion in Q1-2009 the total outstanding number was on the higher side when compared to end-March 2008 outstanding level of Rs 2.81trillion. On the contrary, non-interest income depicted a decline of 13 percent at Rs 17.8 billion primarily due to some large one-time gains in the previous years comparable quarter coupled with the low capital gains during quarter under review. The provisions against NPLs increased two-fold at Rs 14.5 billion. In addition to this, the banks also booked Rs 650 million impairment losses in Q1-2009. Interestingly, few banks which had charged 100 percent impairment on P&L account in their annual accounts of 2008 also showed reversal under the head of provision against diminution in value of investment. Administrative expenses also depicted a jump of 15 percent at Rs 34.2 billion.