HBL consolidates growth

HBL seems to have started 2020 on the same note where it left 2019. The first quarterly results of CY20 are out, and it is business as usual for the country’s biggest commercial bank. The usual is good at HBL. The dividend continues to come along – as Rs1.25 per share was announced as the first interim dividend of CY20. The pretax profits did go down, but the after-tax profit growth was handsome at 29 percent year-on-year.

HBL’s balance sheet continued to expand n both domestic and international markets – with the domestic balance sheet registering a growth of Rs235 billion over the same period last year. The deposit growth remained healthy without being exemplary – as the focused righty remained on adding good quality low cost current deposits. The average current deposits grew by over 6 percent year-on-year, whereas the average total deposits registered 8 percent increase in the same period.

The net markup income increased handsomely, on the back of higher learning yields and bigger asset size. The markup earned was an equally neat mix of interest on advances and investments. Recall that the interest rates had stayed on the higher side for most of the period, and the industry was also making a shift in the investment mix between long term and short-term instruments.

The non-markup income slid slightly, but still offered formidable support to the bottomline. Fee and commission income remained the single largest contributor to the non-markup income. Gain on sale of securities, primarily the PIBs made up for the foreign exchange loss. The administrative expenses shot up significantly, which the bank puts down to costs associated with the New York operations, where closure activities have accelerated. The bank management expects these costs to taper off going forward.

HBL’s CASA stood at 82.7 percent for the period, which appears to be strengthening by the day, as the bank consolidates its deposits base, with smart addition of low-cost deposits. With Covid-19 entering the scene, things are obviously going to get trickier, for every industry, and banks are no exception. There may be cases of higher NPLs going forward – but HBL’s indicators are sound enough to weather the storm, if any.