HBL is the market leader by some distance. And it continues to post impressive numbers quarter after quarter. The country’s largest bank raked in Rs25.2 billion in after-tax profits for 9MCY19, a growth of almost three times over the same period last year. Consider that these numbers have been achieved mostly under the pandemic.
HBL continued to add to its already impressive domestic deposit base, increasing the market share to 14.4 percent. The bank’s domestic deposit base expanded by over Rs300 billion during 9MCY20 to Rs2.5 trillion, whereas the total deposits reached Rs2.7trillion – representing an 11 percent growth in deposits over December 2019. The liability profile continues to project strong CASA numbers at 82 percent, with the share of current accounts at a strong 34.6 percent.
The- non-funded income contributed significantly despite visibly reduced activities, footfall, and overall slowdown. The fee and commission related income understandably stayed lower year-on-year, due to lockdown, reduced working hours and lesser business activity. But that was more than compensated by a meteoric rise on account of gains on sale of securities, which went up from minus Rs2.4 billion in 9MCY19 to a staggering Rs7.3 billion in 9MCY20.
The bank did exceptionally well to keep a tight lid on the administrative costs, which were kept under control, going up by only 2 percent year-on-year. This is despite continued investment towards digital initiatives and strengthening the controls and compliance. Recall that HBL, of late, has put great emphasis on compliance and controls, which had soared the expenses in the last year. Things have started to pay the dividend it seems, and the New York episode appears to be a lesson well learned.
The cost to income ratio has come drastically down from 77 percent in 9MCY19 to 57 percent in 9MCY20. The domestic provisions remained almost 50 percent lower from FY19, but HBL has adopted a rather prudent approach, taking Rs6 billion as a buffer against general provisions mainly on account of potential non-performing loans from the pandemic impact. The coverage ratio, as a result, has increased to over 100 percent of NPLs.
The economy is showing signs of a comeback, as evident by resurgence in demand and economic activity is gradually building up. The signs were evident during 9MCY20 as HBL reported 16 percent growth in consumer financing, driven by auto and personal loans, in just one quarter. The interest rates may well have bottomed out and may lead to further asset reprofiling. The loan book is very well provided for, should the pandemic impact extend further.
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