LAHORE The profit of big banks in the country has posted impressive improvement of 24 per cent for the six month ended June 2011 to reach Rs40 billion while their pre-tax profit has soared to Rs 60 billion. According to the banking sector experts, five large banks including NBP, HBL, UBL, MCB and ABL, which contribute more than 57 per cent share of the total banking sector deposits and represent around 80 per cent of the market capitalization. However, if NBP which incurred huge provisioning in 2Q2011, which is 40 per cent of the combined provisioning of other 4 large banks, the profitability growth further improves to 31 per cent. Bank wise profitability shows that ABL posted highest profitability growth of 39 per cent, followed by MCB of 33 per cent, UBL 29 per cent, HBL 25 per cent and NBP 3 per cent. Experts said that at a time when there are fear of US slipping into recession and banking stocks are under pressure globally, banks in Pakistan have posted above average growth in their earnings. Thanks to higher return on advances and better yield on government papers, overall net interest income (NII) of these big banks grew by 17 per cent, said Farhan Mahmood, a noted financial expert, in his report. He pointed out that this shows impressive core banking operations as average 6-month KIBOR increased by 154bps in 1H2011 compared to 1H2010 while cost of funds remained on the lower side. Moreover, large banks continue to opt for a risk averse approach by parking their funds into less risky government securities which also contributed to higher NII. Similarly, with overall improvement in trade activities, non interest income of big banks grew by impressive 22 per cent. On the flip side, provisioning remained on the higher side which stood at Rs19 billion , up 20 per cent. He expects that the advances growth would remain lower amid higher interest rate scenario and lower appetite for credit, better spread will keep NII on the higher side. Though growth in non-performing loans has slowdown considerably in last quarter (June 2010), however, there is high probability that NPL accretion to pick up during the rest of the year since decline in commodity prices may affect borrowers paying capacity. Habib Bank Limited in 1H2011 posted unconsolidated earnings of Rs9.3b against earnings of Rs7.4b in 1H2010 an increase of 25 per cent YoY. In 2Q alone the bank reported a profit of Rs4.6b, down 2 per cent QoQ. As expected, the bank did not announce any payout with the result. Net Interest Income (NII) rose by 19%YoY to Rs26.2bn in 1H2011, as KIBOR remained high by 140bps on a YoY basis. Non Interest Income too rose by 18%YoY to Rs6.5bn. However, total provisioning was higher by 52%YoY at Rs4.7b. Nonetheless, experts think this impressive earnings growth will continue as they expect banking sector to post earnings growth of 23 per cent in 2011. They continue to maintain 'Over-weight stance on Pakistan banking sector with 'NBP and 'UBL remain as best picks in banking sector.