Bank Al Habib Limited (BAHL) is doing just fine, even in these times of thin spreads, low interest rates and muted deposit growth. The top line was not expected to grow massively, but BAHL did well enough to consolidate its asset base, registering an increase of 15 percent over December 2016. The spreads were obviously squeezed, but the rise in earning assets is well reflected in whatever little growth BAHL achieved in top line.
BAHL has been a reluctant lender, but tides now seem to be changing as the ADR has now stepped beyond the industry average at 45 percent. The financing portfolio swelled by 15.5 percent to Rs301.8 billion. The bank proudly holds one of the cleanest loan books amongst peers, as evident from its infection ratio of just 1.87 percent, which is more than adequately provided for at 138 percent. Provisioning expenses, as a result, have been kept well in check.
The real deal was, however, a massive surge in non mark-up income, which almost doubled from last year same period. Gain on sale of securities, which has been the chief reason for most banks’ limited profit growth this season, was the key behind BAHL’s impressive bottom line growth. The regular contributions from fee and commission income also contributed heavily towards non-core income, improving the cost to income ratio.
The overall asset growth indicates that investments in government securities continue to meet the pace of advances growth. Lending may well have gone up industry wide, but the preferred parking lot still continues to be sovereign government papers. Investments portfolio also increased by 15 percent over December 2016. Liability side growth also stayed strong, with a 15 percent growth in deposits over December 2016. From the looks of it, most of the increase seems to have come in low cost current account deposits.
All said BAHL looks to be in fine shape. Whether or not a cleaner loan book will now translate into higher advances growth remains to be seen
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