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Bank Al Habib Limited (BAHL) went from strength to strength in CY20, despite all the challenges that the externalities had to throw for the best part of the year. The after-tax profits soared by a massive 59 percent year-on-year, with the growth stemming from right at the top. There was hardly a blip in the income statement, and only a couple of areas, where a little tightening of the screws would help more. The phenomenal profit growth was met with final cash dividend announcement of Rs4.5 per share.

The bank’s net markup income increased at the back of volumetric expansion, despite lower average interest rates on earning assets. The asset base grew to Rs1.5 trillion – higher by 17 percent over December 2019. Bulk of the increase was understandably concentrated in the investments, the share of which in total assets further expanded, and the ADR ended at a high 69.6 percent as at December end 2020.

The ever-changing interest rate dynamics particularly during the corona quarter, led to a visible shift in the investment mix, where investments tenors were altered as per the interest rate outlook. That said, investments remained the favored parking lot, and risk-free return on T-bills and PIBs constituted the bulk of markup income.

The advances portfolio remained in check for most part of year, seeing modest increase of 4.4 percent to Rs510 billion over December 2019. The private sector credit demand remained subdued for better part of the y ear and only picked up towards the tail end of the year. BAHL still managed to show some growth in the loan portfolio, despite restricted economic activity.

The loan book was very adequately provided for, and the NPLs ratio was only restricted at 1.41 percent, which is reflective if the bank’s sound risk management and prudent approach. The provisioning charges for the year were understandably higher, as was the industrywide trend in 2020, with banks opting to set aside more in provisioning owing to Covid-19.

The non-funded income arm continued to lend an able hand, despite challenges on the trade volume front due to the pandemic. The administrative expenses grew on the higher side, slightly more than the management would have hoped. But the continued focus on expansion and technology explains some of this rise.

The deposit base grew at a rapid pace – outpacing the industry growth. BAHL ended the year with total deposits north of Rs1 trillion, becoming the newest member of the trillion-rupee deposit club. The non-remunerative deposits grew at a higher pace at 24 percent, in line with the management’s aim to continuously better the CASA and lower the deposit cost. With economic activity picking up, and more clarity on the interest rate front, BAHL should continue the merry run, with its clean and growing balance sheet.


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