Pakistans largest commercial bank in terms of deposits, HBL, delivered yet another impressive financial performance as it announced its 9MCY12 financial results, registering 11 percent year-on-year growth in profits.
The performance was attributable to an above industry-average 21 percent increase in asset size over December-end 2011.
The top line growth of 18 percent year-on-year is a commendable feat given the low interest rate scenario. HBL managed to increase its investments by a massive 52 percent over December-end 2011.
Parking the assets in government papers has of late been the preferred strategies of banks, particularly the bigger ones, but HBL was well above its peers in this regard as the other big banks on average added 19 percent investments over December end 2011.
Advances, on the other hand, continued to grow rather slowly and HBL was at par with the other top-tier banks in terms of showing a modest advances growth of 4.7 percent over December end 2011.
It was not a surprise that the mark-up income composition drastically changed from the previous year, with the mark-up on investments now having the lions share.
The Banks ADR and IDR as a result, swapped places with the ADR further reducing to 43 percent, while the IDR grew to 58 percent. The gross spread ratio, though understandably lower, remained at par with peers.
A reduction of 200 bps in the discount rate in recent months and more reliance on low yielding government securities has slowed down the mark-up income, whereas higher return on deposits has added pressure on spreads.
HBLs major achievement in 2012 has been its stupendous growth in deposits, outpacing all its peers with an impressive 18 percent deposit growth over December-end 2011.
Other top-tier banks have struggled to add on their deposits significantly, registering an average of only six percent growth in the same period. HBL maintained a healthy CASA ratio of 68 percent as at September end 2012, which is slightly better than the average of its peers.
A significant decline in provisioning charges was also instrumental in achieving a strong bottom line growth. Slowdown in advances and aggressive provisioning in yesteryears provided HBL the space to cut on the provisioning cost.
NPLs have picked up by eight percent over December-end 2011, which has reduced the coverage ratio from 85 percent to 79 percent.
Going forward, the lack of appetite from the private sector would mean a continuation of the current strategy of parking assets in government securities. The mark-up income growth may slow down given the low interest rate scenario, but the strong deposit base gives HBL enough room to maintain healthy performance in the future.
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HABIB BANK LIMITED
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(Rs mn) 9MCY12 9MCY11 chg
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Mark-up Earned 84,615 71,565 18%
Mark-up Expensed (41,008) (30,532) 34%
Net Markup Income 43,607 41,033 6%
Provisioning (3,612) (5,691) -37%
Net Mark-up income after provisions 39,995 35,342 13%
Other income 11,517 10,788 7%
Operating revenues 55,124 51,821 6%
Other expenses (23,433) (21,996) 7%
Profit before taxation 28,079 24,135 16%
Profit after taxation 17,402 15,722 11%
EPS (Rs) 14.21 12.88
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Source: Company Accounts.
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