HBL expects investment yields to rise as floating-rate securities reprice

Habib Bank Limited (HBL), one of Pakistan’s largest commercial banks, expects yields on its investment portfolio to gradually increase as floating-rate securities reprice, the bank’s management said on Wednesday, while highlighting strong deposit growth, digital banking expansion and resilient asset quality.

During an analyst briefing session, attended by KTrade, held to discuss the third-quarter results, HBL said floating-rate securities accounted for around 60% of its investment portfolio as of September 2026, while medium-term bonds (MTBs) and fixed-rate securities represented 15% and 25%, respectively.

The fixed-rate portfolio had a duration of 3.2 years, while the overall investment portfolio had a duration of around 1.12 years.

The bank also increased its Pakistan Investment Bond (PIB) holdings by approximately Rs450 billion between the second and third quarters of 2026.

HBL reported earnings of Rs19.6 billion, or Rs13.33 per share, for the third quarter of calendar year 2026, up 6.5% from the preceding quarter, in line with market expectations. It also announced an interim cash dividend of Rs6 per share.

The bank’s current account deposits increased 15%, or Rs273 billion, during the nine months ended September 2026, taking their share of total deposits to 40% from 38% at the end of December 2025.

HBL said its Islamic banking business continued to expand, with Islamic deposits reaching Rs1.3 trillion in September 2026. Around 36% of its branch network was Islamic, comprising approximately 658 Islamic branches and 500 Islamic windows.

The bank operates more than 2,000 branches and added around 84 branches during the nine months. Its core banking migration to Temenos is also progressing, with 800 branches already migrated and further milestones expected in 2027.

On the lending side, domestic advances recorded growth across corporate and commercial segments, alongside an expansion in international lending.

HBL’s consumer financing portfolio crossed Rs200 billion, the largest in the market, while credit card receivables reached Rs66 billion. Islamic financing accounted for around 20% of the bank’s overall loan portfolio.

Asset quality remained strong, with the infection ratio at 4.5% and specific coverage at 85%, supplemented by general provisions, the bank said.

HBL also reported a 76% year-on-year increase in foreign exchange income, alongside strong fee income growth.

Digital banking activity continued to gain traction, with mobile application throughput rising 36%. Digital over-the-counter transactions accounted for 94.6% of total transactions, leaving 5.4% conducted through physical branches.

On regulatory requirements, management said HBL was already compliant with the State Bank of Pakistan’s phased requirement to reclassify its banking-book other comprehensive income portfolio into the trading book.

The bank’s management expects no incremental capital requirement or impact on its Common Equity Tier 1 ratio from completing the reclassification.

Separately, HBL’s management said it expected a favourable outcome in an ongoing civil liability case in New York, clarifying that the proceedings were separate from previously discussed penalty-related matters.

The proceedings are progressing according to schedule, with management anticipating a relatively early conclusion, although the US legal process could take time.