Lahore: The Federal Constitution Court has ruled against the National Bank (NBP) in a significant pension case, dismissing the bank's appeal and extending pension increase benefits to a broader class of pensioners. The decision marks a pivotal moment for pensioners who were previously not part of the litigation, allowing them to receive government-announced pension increases.

According to JS Global, the latest ruling stems from a long-standing legal battle that initially saw the Lahore High Court rule in favor of pensioners in 2016. The court directed NBP to extend pension increases to all pensioners, a decision that was later suspended by the Supreme Court. The Federal Court's recent decision reverses this suspension, broadening the application of pension increases to non-petitioning pensioners as well.

The financial implications for NBP are substantial. The bank has already allocated Rs57.5 billion for past service costs related to pensions in 2024. Management is considering additional provisions in light of the new judgment, though the exact amount remains uncertain. Sensitivity analysis suggests that every Rs5 billion of additional provision could result in an incremental after-tax impact of Rs1.1-1.3 per share on earnings.

NBP's pension-related expenditures have significantly increased over recent years. In 2024, the bank recorded a one-off charge of Rs57.5 billion, escalating the total pension-fund cost to Rs72.6 billion, compared to Rs4.4 billion in 2023. This rise in pension costs has led to a surge in benefits paid by the bank, increasing from around Rs1.7-1.8 billion annually (2021-2023) to Rs20.0 billion in 2024. Consequently, the net pension liability has grown to Rs75.6 billion in 2024 from Rs22.9 billion in the previous year. These figures are specific to the pension fund and do not include other employee benefits such as medical and gratuity schemes.