KARACHI - Three leading commercial banks will announce their financial results respectively for the calendar year 2008 this month to show their full year profitability with earnings per share and declare dividend for the shareholders. The board of directors of NBP, the largest commercial bank in the public sector and the other two major banks in the private sector namely Standard Chartered and NIB are scheduled to meet during current month to review and approve 2008 financial performance and to present audited accounts to their respective top-level management. According to banking sector experts, the banks' balance sheet for CY08 is mostly expected to intimidate by the rising NPLs growth and melting asset quality that will force banks to book heavy provisions for NPLs during ongoing year. But at the same time, SBP's mandatory ceiling of 70 percent for ADR would alleviate the default risk coupled with a gradual decrease in per party exposure. Moreover, the minimum capital requirement would benefit in improving solvency of the banking sector going forward. However, stronger banks such as NBP, UBL and BAFL are anticipated to outperform the market in CY08 through better earnings prospect. Earlier, MCB, HBL, AKBL and FABL had already revealed CY08 financial statements, revitalising investor's interest towards the banking sector. As per the banks' announcements, MCB Bank posted Rs 15.4b profit after tax during calendar year 2008 (CY08) as against Rs15.3b of last year, translating into an EPS of Rs. 24.47 as compared to Rs. 24.30 of 2007. However, the Bank registered Rs 21.9 billion profit before tax during the reporting period, depicting an increase of Rs 560 million over 2007. Habib Bank Limited (HBL) declared earnings of Rs13.2/share and a dividend and bonus payout of Rs5.5 and 20 percent respectively. While earnings depicted a growth of 24pc YoY led by strong showing of net interest and non-interest income, recognition of Rs2.0b impairment loss and rising Non-Performing Loans (NPL) ratio remained major highlights of the financial accounts. HBL's earnings rose 24 percent to Rs10.0bn (EPS Rs13.2) mainly driven by 17 percent rise in net interest income (NII) to Rs35.6bn amid rising spreads and net interest margins (NIM). The bank's NIM rose by 40bps YoY on account of higher yields on earning assets as interest spreads widened by 33bps during the year. Provisions for non-performing loans expectedly declined by 17 percent to Rs6.7b due to absence of huge Forced Sale Value charge recognised in last quarter of 2007. The major point of concern for HBL however, has been the sharp rise (47percent) in NPLs to Rs36.0b. Resultantly NPL ratio has gone up by a massive 150bps to 8.3 percent and clearly signals substantially high provisions in 2009. Given considerable decline in industrial production and HBL's substantial exposures to textile sector (21 percent in 2008), provisions for NPLs is estimated to increase to Rs7.7b in 2009. AKBL and FABL reported 19 percent YoY decrease in provisions charged to the profit and loss. The impact of higher NPLs is being reflected in banking sector results for CY08 where NPLs remained the major earning dampener so far. At this point, where macroeconomic imbalances are shrinking, credit demand and restricting lending capacity of the banks, NPLs remains the most threatening element for banks profitability in CY08. Meanwhile, as per SBP's latest update, NPLs for the commercial banks rose by Rs103.07b (57 percent YoY) in CY08. However, reversals by Specialised Banks of Rs3.61b resulted in total NPLs for the banking sector settling at Rs313.66b, depicting a significant rise of Rs99.05b (46 percent YoY). The major increase in NPLs was observed in the public sector banks, of Rs33.87b. BOP is expected to be the major contributor as the bank recorded total NPLs of Rs18.9b during 9MCY08. Higher defaults of loans also impacted the private sector banks, where NPLs increased by Rs67.38bn (49 percent YoY in CY08). As per SBP data, incremental provisions against NPLs for CY08 recorded at Rs49.58b compared to Rs47.92b booked in CY08. Last year, provisions remained higher due to the withdrawal of FSV. The significant rise in NPLs would remain a concern in terms of specific provision which would remain on higher side. However, the SBP allowed banks to take advantage of 30pc FSV in CY08 which is diluting the impact of higher NPLs. Strengthening the requirement for provisions since CY07 has helped in maintaining better asset quality of the banks.