Habib Metropolitan Bank: Walloping performance

The balance sheet shrunk by seven percent despite a healthy growth in deposits. A 12.5 percent growth in deposits in the past six months added flying colours to the line managers and depicts consumers confidence in the financial strength of the bank. However the infection ratio which has inched up to 13.6 percent is quite high, signaling the unorthodox lending practices of the bank while asset management may also be a concern going forward on account of sluggish credit growth as advances were slow in 1HCY12. The management needs to gear up to reap the juice of handsome deposits growth. The meager growth of three percent in the mark-up earned is well compensated by a three percent fall in the mark expensed to make the net markup income grow by a fifth. The coverage ratio of the bank is aggressive as well - as it is covering only 67 percent of toxic assets. By virtue of this, the bank managed to trim the provisioning and posted a healthy 51 percent increase in mark up earnings net of provisions. The bank has to learn lessons from similar sized foreign banks in terms of triggering other income - known as smart banking by few. Non mark up increased by a mere three percent in 1HCY12. The Seth culture is good to put reins on the administrative expense - matching the inflation despite an increment of seven branches in the last six months. Hence, the mix of cost cutting, deposits growth and less coverage led to a 40 percent growth in the bottom line of Habib Metropolitan bank to reach EPS of 1.79 in the first half 1012.

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Habib Metropolitan Bank
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(Rs mn)                              1HCY12    1HCY11       chg
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Mark-up  earned                     13,261    12,867         3%
Mark-up  expensed                   (8,936)   (9,248)       -3%
Net mark-up Income                   4,325     3,619        20%
Provisioning                        (1,412)   (1,690)      -16%
Net mark-up income after provision   2,913     1,929        51%
Non-markup  income                   2,681     2,603         3%
Operating revenues                   7,006     6,222        13%
Non-markup  expenses                 2,835     2,564        11%
Profit before taxation               2,759     1,968        40%
Profit after taxation                1,875     1,433        31%
EPS (Rs)                              1.79      1.37
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Source: KSE notice