Key Takeaways
- Federal Constitutional Court dismissed NBP’s appeal, entitling pensioners to government-announced increases.
- NBP may need to make additional provisioning for pension obligations, with potential impact on earnings.
- Pension-related costs have risen sharply for NBP, with net payable pension liability increasing significantly.
NBP pensioners have been declared entitled to government-announced pension increases after the Federal Constitutional Court (FCC) dismissed the bank’s appeal in a long-running pension case.
In a notice to the Pakistan Stock Exchange (PSX) on Thursday, NBP Company Secretary (Acting) Mehnaz Salar stated that the FCC on September 16 dismissed the bank’s appeal in ‘Civil Appeal No. 1688/2021, National Bank of Pakistan & others vs. Khawaja Abdul Hameed Nasir & others’, thereby entitling pensioners to the increases.
The ruling extends the benefit of government-announced pension increases to NBP pensioners who were not parties to the earlier litigation, according to Topline Securities.
In 2016, the Lahore High Court had ruled in favour of pensioners, directing NBP to extend government-announced pension increases to its pensioners. However, the Supreme Court subsequently suspended that order, directing payment of the increases only to pensioners who were parties to the litigation.
Topline Securities estimated that every Rs5 billion of additional pension provision could have an incremental after-tax impact of Rs1.1–1.3 per share on NBP’s earnings.
NBP had already booked Rs57.5 billion in 2024 on account of past service pension costs, with total pension-fund costs rising to Rs72.6 billion, compared with Rs4.4 billion in 2023, including the recurring impact.
Following the latest judgment, NBP’s pension-related costs have risen sharply, with benefits paid by the bank increasing to Rs20 billion in 2024, from a historical run rate of around Rs1.7–1.8 billion during 2021–2023.
As a result, the bank’s net payable pension liability rose to Rs75.6 billion in 2024, compared with Rs22.9 billion in 2023. These figures relate to the pension fund only and exclude medical benefits, gratuity schemes, and other obligations.
While the potential amount of additional provisioning remains uncertain, NBP’s management could record some additional provisioning following the latest judgment.
