Habib Bank Limited (HBL) surely did not miss the PIB bus: Pakistan Investment Bonds, that is. The local banking giant continued investing in PIBs and shying away from T-bills. The result was a shockingly good profit posted yesterday. There was not time enough to shock the market, as the result came in late hours.
Good for the analysts that no awards are due shortly as they were off by a good 25 percent for HBL profits--and that too, without a one-off event distorting estimates. The top line growth is more than decent, but the bottom line is exemplary, on account of better core and non-core activities.
HBL has had clean books for quite some time, and it is getting cleaner by the day. The provisioning charges have substantially reduced for the period, aiding post-provision income. The NPLs are on a steady decline, and they are well-provided for with a healthy coverage ratio.
HBL, like most its big-league peers, has long been in the investments camp, with a low ADR, now even breached 40 percent, going further south. The governments never-ending appetite for borrowing and that too, at expensive rates, has been an opportunity too good to let go of for banks as big as HBL.
The bank has been working rigorously on improving its deposit-mix and an improved CASA touching 80 percent was a result by the end of 1Q CY14. The net interest margins have improved, despite requirement of increased return on deposits, which show that the bank aims to leave no stone unturned in improving the deposit-mix to limit the damage.
The non-core income provided ample support to the bottom line as fee, commission and currency returns all combined to post strong non-mark-up income. The rate of increase in administrative expenses above inflation appears to be the only blot on an otherwise outstanding performance--one that HBL may soon want to remove.
Little suggests any impending shift in the local banks strategy towards asset-mix. Should the rates recede; banks would be more than happy to book gains. Should they not, IDRs will continue increasing. At this pace, lenders would remain reluctant. Finance Minister Ishaq Dar in a recent TV show reminded banks of their primary responsibility of providing credit to the private sector. Only if he could remind himself of some responsibility in borrowing all the time regardless of rate!


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Habib Bank Limited (Consolidated P&L)
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Rs (mn) 1HCY14 1HCY13 chg
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Markup earned 66,218 61,560 8%
Markup expensed 34,254 35,318 -3%
Net Markup Income 31,964 26,242 22%
Provisioning/(Reversal) 112 1,197 -91%
Net Markup Income after provisions 31,852 25,045 27%
Non Mark-up/Interest Income 11,319 8,025 41%
Operating revenues 43,171 33,070 31%
Non Mark-up/Interest Expenses 21,025 17,201 22%
PBT 22,146 15,869 40%
Taxation 7,556 5,348 41%
PAT 14,589 10,520 39%
EPS (Rs) 9.88 7.07
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Source: KSE Notice

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