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Pakistan’s biggest commercial bank HBL continued its merry way more than doubling profits year-on-year, as the 1QCY21 financial results were announced. The 108 percent year-on-year profit growth was accompanied with interim cash dividend declaration of Rs 1.75 per share. HBL’s balance sheet continued to expand, showing an increase of Rs500 billion over 1QCY20.

On the liabilities front, the average domestic deposits increased by 20 percent year-on-year, as HBL’s Rs2.8 trillion deposit book is comfortably the biggest in the industry. The deposit base is headlined by roust increase in low-cost current and saving accounts, with current account registering an increase of Rs120 billion. CASA ratio remained strong at over 83 percent, where current accounts constitute 35 percent of the overall deposits.

Recall that the interest rate dynamics are significantly altered from 1QCY20, as the rates were lowered when Covid hit. The NII still managed to increase in double digits, showing the bank managed the earning assets rather well, and channeled the deposits in the right direction. The earning assets remain dominated by investment portfolio, which was higher by 19 percent over March end 2020. There has been considerable tenor management within the investment portfolio, in line with the interest rate environment.

On the advances front, the growth has been understandably moderate, given the macroeconomic conditions. The consumer side of affairs picked up pace, as low rates have led to higher demand for automobiles and personal loans – resulting in the consumer loan portfolio growing to Rs85 billion, up from Rs59 billion at the end of 1QCY20. The NPLs stayed static, and the infection ratio was maintained at 6.3 percent – which is a record low for HBL. The NPLs are adequately provided for with the specific coverage in excess of 86 percent.

The drive towards technology shows in much controlled administrative expenses, as the cost to income ratio improved from 81 percent in the same period last year to 58 percent. Non-funded income contributed significantly to the bottomline, led by sizeable increase in fee, commission income which increased by 25 percent year-on-year.

The pandemic and the resultant regulatory steps taken by the central bank have surely led to increased use of digital platforms for banking. HBL too, showed exponential growth in mobile and Internet banking volumes, which more than doubled from last year, as transaction fee on internet banking was waived. Mobile App usage and E-commerce transactions have also picked pace. Going forward, HBL should be able to leverage its strong balance sheet and exemplary prudent approach to take full advantage of the ever-improving macroeconomic indicators, which should eventually lead to more banking opportunity.

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