The country’s biggest commercial bank, HBL, continued to show why size matters, as it posted 21 percent year-on-year growth in pretax profits for 1HCY21. The result was accompanied with interim cash dividend declaration of Rs 1.75 per share, taking the total dividend to date to Rs3.5/share. The profit and loss numbers only tell this much of the story, as the real story lies with the impressive balance sheet.
HBL’s balance sheet crossed Rs4 trillion mark, comfortably the largest balance sheet in the industry. HBL marked another first by crossing a mammoth Rs3.1 trillion in deposits, forming a league of its own. The deposit base continues to be improving every quarter, as CASA ratio sits high, and the bank crossed Rs1 trillion mark in current accounts alone. Another first. The total deposit base grew 10 percent over December 2020, outpacing the rather muted industry deposit growth.
The asset side continues to be dominated by investments, which constitute nearly two-thirds of the asset base. The investment portfolio crossed an unprecedented Rs2 trillion during the period, which goes on show that the appetite for genuine credit demand may still be some way off the optimal level. Not that the banks quite mind making money on t-bills and PIBs. That too, risk-free. There is an ever-hungry sovereign borrower out there, ready to pay decent rates. Most banks would not hesitate to lend the sovereign borrower. HBL does the same, and that makes the biggest contribution to its topline.
The advances portfolio grew as well, in fact more than the investment portfolio over December 2020, both in absolute and relative terms. Stable and low interest rate scenario has certainly led to increased loan demand from the retail segment, as HBL recorded sizeable gains in personal and auto financing during the period. AS economic activity picks up, HBL should not be too far behind to grow its advances portfolio towards a higher ADR than the current one which hovers in the low to mid 40s.
On the P&L front, the non-funding income made a resounding comeback, spearheaded by fee and commission income. All non-funded income heads showed sizeable growth, except for gain on sale of securities. HBL managed to keep a tight lid on administrative expenses that went down 2 percent year-on-year, leading to improved cost-to-income ratio of 56.8 percent in 1HCY21, from nearly 60 percent in the same period last year. The infection ration stayed in single digits and NPLs declined during the period and are adequately provided for.
HBL has leveraged its digital footprint to great use, reporting substantial traction in mobile and Internet banking channels. As Pakistan looks to consolidate the newfound growth phase, HBL should be at the core of big-ticket lending soon.