Category: Industry

Aamir Khan, Commissioner Insurance at SECP stated that the adoption of international reporting standards for modernizing Pakistan's insurance industry is a critical priority for SECP as a regulator of the insurance sector. He was delivering the keynote address at the Institute of Chartered Accountants of Pakistan (ICAP) seminar on IFRS 17 Implementation. Khan stressed the importance of IFRS-17 adoption by January 1, 2026, as any delay could lead to Pakistan's market lagging behind international markets. He emphasized the responsibility of stakeholders and SECP as regulators in implementing IFRS-17 and the need for familiarization with its impact on decision-making. The seminar was attended by representatives from the Korean Accounting Standards Board industry players, experts, consultants, and SECP policy department personnel. Insurance, he said, being an integral component of the overall financial sector, serves as an automatic stabilizer by mitigating the economy's sensitivity to macroeconomic shocks i n addition to being a saving and capital formation tool. Despite the potential to promote sustainable finance, and support long-term risk-taking, the Insurance landscape of Pakistan has remained underdeveloped. The comparison to its peers representing less than 1% of GDP, is one of the lowest in the region. As of 2022, the total assets stood at PKR 2.42 trillion (circa USD 10.5 billion) with the written premium standing at Rs. 553 billion (c. USD 2.5 billion). Despite the small industry size and a fragmented structure with 42 active players, the insurance industry offers tremendous potential. In this regard, the SECP embarked on the initiative of identifying gaps and challenges in the insurance industry, jointly with industry stakeholders, and formulated the 5-year Strategic Plan which was launched in December 2023. One of the key priority areas of the 5-year strategic plan is the achievement of financial stability through the adoption of International Financial Reporting Standards and Risk-Based capital re gimes for the insurance industry. Fundamentally, IFRS 17 is designed to bring about greater transparency and consistency in financial reporting in the insurance industry. Being a globally accepted accounting standard for the measurement of insurance contracts, the adoption of IFRS-17 shall allow the international markets to look positively at the Pakistani insurance market, and make the comparative assessment easier. Through reflection of information related to underwriting and investment activities on the financial statements, in a transparent manner, it can serve as a game-changer in building trust and confidence among investors, regulators, existing and potential policyholders, as well as other stakeholders, such as rating agencies and reinsurers. SECP expects IFRS 17 also to be a key catalyst for insurers to review, if not overhaul, business processes across the organization. This will be driven by at least three factors: First, the need for business units to capture broader and more granular informat ion required for financial reporting; Second, changes in the way performance is measured under the new standard; And third, increased opportunities for insurers to differentiate themselves from the competition, helped by a more integrated view of performance. These considerations will have wide implications for organizations' structures, data-capturing mechanisms, risk management, product design and development, and systems. Recognizing the importance of standardized financial reporting, the SECP is actively engaged in the process of implementing IFRS 17 and aligning related regulatory frameworks to support transitioning to the new standard. In collaboration with ICAP, the PSOA, and the insurance industry, the SECP envisaged a four-phased approach for the implementation of IFRS 17, where work under phase 3 - System Design and Methodology, is underway. Given that the majority of international markets adopted the standard either last year or this year, meeting the adoption timeline of January 1, 2026, is c ritical and an absolute priority for SECP's team looking at insurance policy. Source: Pro Pakistani

Allied Bank Limited (PSX: ABL) announced earnings (PAT) today for 1QCY24 at Rs. 11.6 billion, depicting an increase of 51 percent YoY, however down 5 percent QoQ. According to Arif Habib Limited (AHL), the decrease in earnings QoQ was mainly attributed to reduced markup and non-markup income. However, on a YoY basis, higher income and provisioning reversals contributed to an increase in overall profitability. Along with the result, ABL announced a cash dividend of Rs. 4.0 per share. In the 1QCY24, the bank reported a Net Interest Income of Rs. 29.2 billion, marking a significant 43 percent rise from the same period in the previous year. However, this figure represents a 10 percent decline from the preceding quarter. Interest earned surged by 28 percent compared to the previous year and saw a modest 1 percent increase from the previous quarter. On the other hand, interest expenses witnessed a 22 percent increase compared to the same period last year and a 7 percent uptick compared to the prior quarter. I n the outgoing quarter, non-markup income continued its downward trend, experiencing a 4 percent YoY decline and a more significant 16 percent QoQ decrease. This decline was primarily driven by a substantial drop in FX income, which plummeted by 61 percent YoY and 62 percent QoQ. Additionally, gains on securities were down by 28 percent QoQ, totaling Rs. 303 million in 1QCY24. However, there was a contrasting positive trend in Fee Income, which showed robust growth. Fee Income surged by 45 percent YoY and 20 percent QoQ, reaching Rs. 4 billion in 1QCY24. In the 1QCY24, the bank reported a reversal in provisioning of Rs. 163 million, marking a significant turnaround from the provisioning charge of Rs. 2.3 billion recorded in the same period last year. The operating expense of the bank clocked in at Rs. 13.6 billion in 1QCY24, up 16 percent YoY and 10 percent QoQ. With this, the Cost/income ratio stood at 39.9 percent for 1QCY24, down from 42.9 percent in the same period last year. The effective tax rate fo r the bank was set at 49 percent during 1QCY24, showing an increase from 43 percent in the same period last year. ABL posted earnings per share (EPS) of Rs. 4 for Q1 2024 compared to an EPS of Rs. 2.5 in the same period last year. Source: Pro Pakistani

The Pakistani rupee fell third day in a row against the US Dollar after opening trade at 278 in the interbank market. It was largely stable against the greenback but crashed against other major currencies today. The interbank rate stayed at 278.5 most of the day before closing at the same level. Open market rates across multiple currency counters were in the 278 level today. The PKR depreciated by 0.01 percent to close at 278.39 after losing two paisas against the dollar today. On a fiscal year-to-date basis, the rupee has so far appreciated by 2.68 percent. Overall, the rupee is down nearly Rs. 51.49 since January 2023. Since April 2022, it is down Rs. 95.49 against the greenback. As per the exchange rate movements seen today, the PKR lost two paisas today. The PKR was red against all of the other major currencies in the interbank market today. It halted losses against the UAE Dirham (AED) but lost one paisa against the Saudi Riyal (SAR), 37 paisas against the Canadian Dollar (CAD), 41 paisas against the Euro (EUR), and Rs. 2.65 against the Australian Dollar (AUD). It lost Rs. 2.02 against the British Pound (GBP) in today's interbank currency market. Source: Pro Pakistani

The government has requested the World Bank for restructuring of Higher Education Development in Pakistan (HEDP) project of worth $400 million for third time to allow for the completion of critical IT and IT-related activities and the full achievement of Performance Based Condition (PBCs). Official documents revealed that the project is in its fifth year of implementation and its objective is to support research excellence in strategic sectors of the economy, improve teaching and learning and strengthen governance, in the higher education sector. The government requested an extension with the revised closing date of June 30, 2025. This extension will help HEC achieve a strengthened digital learning infrastructure contributing to a more resilient higher education system in Pakistan. The overall project implementation progress is rated moderately satisfactory. Of the 13 intermediate results indicators, 02 have already been met, 09 are likely to be met, and 02 are unlikely to be met. The project has made imp lementation significant progress. The disbursement from IDA Credit as of February 29, 2024, is $278.30 million, including $258.19 million against PBCs and $20 million for the Investment Project Financing (IPF) component. Despite the overall reasonable implementation progress, the IT-related procurements under Component 3 had been taking longer than anticipated because of: (i) delayed hiring of IT staff and initiation of IT-related activities, (ii) approvals and completion cycle of several procurements taking longer than anticipated and, (iii) need for revision of the procurement strategy to address capacity challenges of the local IT market. Procurements valuing $50.5 million are under implementation or have been advertised, and another $14.5 million are in the pipeline. The restructuring also entails changes in four PBCs, whereby (a) PBC 1 Year 4 (iii) target to be shifted to year 6 due to the delay in the completion of the Sustainable Development Goal (SDG) dashboard; (b) PBC 1 year 5 (iii) target to be d ropped as development of the portal and allied procurement took longer than anticipated; (c) PBC 11 year 3 (i) target to be shifted to Year 5 as the draft Open and Distance Learning Policy (ODLP) is expected to be approved by February 2024, and subsequently implemented; (d) revise the wording of PBC 5 to apply to both Affiliated Colleges and Affiliating Universities, including retroactive revision of the target for PBC 5 year 3 (iii) and; (e) PBC 11 year 5 (i) target to be shifted to year 6 as with the ODLP approved in year 5, HEC will implement the framework for one year and will hold stakeholder consultations for feedback collection. The dropped PBC 1 Year 5 (iii) target and PBC 11 Year 4 target do not constitute a risk to achieving the PDO. The project has been restructured twice. The first restructuring was approved on June 14, 2021, to respond to the COVID-19 pandemic impacts and involved: (a) introduction of Component 6 to support continued learning for all in case of unpredicted crises and university lockdowns and provision of special funds to universities to increase their financial autonomy, (b) reallocation of funds between Components to better address ongoing needs, and (c) revision of the Results Framework to reflect the changes in activities. The second project restructuring was approved on June 15, 2023, to repurpose the unutilized funds from lapsed targets under PBC 1 and PBC 2 toward: (i) a new round of Rapid Technology Transfer Grants (RTTGs) focused on topics related to emergency response, climate change, extreme weather event preparedness and import replacement research (PBC 1, Component 1); (ii) a new target to track RTTG outcomes (PBC 2, Component 1); and (iii) an increased target for universities participating in the framework for improvement in financial autonomy (PBC 10, Component 6). Source: Pro Pakistani

Standard Chartered Bank (Pakistan) Limited (PSX: SCBPL) has attributed the recent 'unusual movement' in its share price to the bank's strong financial performance in the calendar year ending December 31, 2023 (CY23). 'We understand that the positive trend in the price of the shares of SCBPL was triggered with the announcement of financial results on 23 February 2024 as investors reacted favorably to the strong financial performance of the Bank in the backdrop of an overall bullish trend in the stock market,' the bank explained to the main bourse on Wednesday. The bank recalled that it had announced its annual financial results for CY23 which showcased unprecedented financial performance for the period and posted the highest-ever Profit Before Tax of Rs. 89.2 billion enabled SCBPL to declare its best dividend since its incorporation. The combined dividend announced by the bank for 2023 stood at 90 percent i.e. Rs. 9 per share. The bank said, 'We would also like to furnish that the Bank is not aware of any other development/information that may be relevant to the unusual movement in the price of the shares of the Bank'. The Bank remains fully committed to meticulous compliance with all the regulatory provisions and will continue to ensure immediate dissemination of any price-sensitive information to PSX, the filing added. SCBPL's response comes after PSX earlier this week demanded the bank alongside three other listed firms to explain the reason behind the unusual movement in their share prices. At the time of filing, the bank's scrip at the bourse was Rs. 55.1, up 2.89 percent or Rs. 1.55 with a turnover of 47,500 shares on Wednesday. Source: Pro Pakistani

Non-performing loans (NPLs) disbursed by the banking industry surged by more than Rs. 70 billion in 2023, the latest data by the State Bank of Pakistan (SBP) showed. In 2023, bad loans by the sector surged to Rs. 1.009 trillion, up by Rs. 71.3 billion compared to Rs. 938 billion in the same period last year. Commercial banks dominated the space with most bad loans released to defaulters during the previous calendar year. Data showed NPLs by commercial banks increased by 8 percent to Rs. 956 billion compared to Rs. 883 billion in 2022. Local private banks came in second with bad loans of Rs. 634 billion, up 16.5 percent compared to Rs. 545 billion in the same period last year. Meanwhile, public sector banks disbursed Rs. 320 billion in bad loans, which have decreased slightly from Rs. 336 billion reported in 2022. Foreign banking operations in Pakistan played it safe in 2023, having disbursed just Rs. 633 million in bad loans, down by 66 percent compared to Rs. 1.86 billion in the previous year. Developm ent Finance Institutions (DFIs) attributed Rs. 15 billion to bad loans in 2023, Rs. 510 million more than in 2022. SBP data showed cash recovery against non-performing loans clocked in at Rs. 33 billion for the quarter that ended on December 31, 2023, roughly the same compared to recoveries in the same period last year. In light of this, Pakistan's hopes for a rapid economic recovery remain futile as banks struggle with bad debt. While controllable, this surge is limiting their capacity to extend loans and support economic growth at current lending rates. SBP's steep interest rate, which has remained at 22 percent since June 2023, worsens the problem as it undermines borrowers' ability to repay loans. As a result, loan repayment concerns loom large. Source: Pro Pakistani