Bank Al Habib: Firm and steady

Bank Al Habib Limited (BAHL) marched on with strong quarterly financial performance, registering 8 percent year-on-year growth in pretax profits. The balance sheet continued to expand to nearly Rs1.4 trillion, up by 6 percent over December 2019. The volumetric growth in average earning assets coupled with over 300 basis points increase in interest rates, kept the markup income high.

The asset mix continued to remain tilted towards investments, much in line with the industrywide trend. Investment portfolio increased by 8.6 percent over December 2019, to Rs636 billion. The advances portfolio increased by almost similar percentage to Rs528 billion. The advances to deposit ratio remained almost at similar levels that of previous quarter at a little over 53 percent.

The gross spreads went slightly down during the quarter as against the same period last year. On the liabilities front, the deposit base grew by almost 10 percent over December 2019 – which is much higher than the modest deposit growth across the industry. BAHL still has room for improvement in terms of the CASA ratio, which could come handy, especially in the post Covid days, to bring the cost of deposit down.

The non-markup income increased admirably well in double digits, as the fee and commission income continued to make significant contribution. The strong growth in fee and commission income is testament to BAHL’s strong cross selling and ever-expanding revenue streams, through trade business, genera banking services and alternate delivery channels. The NPL to gross advances ratio remained at low levels at 1.36 percent, with an adequate coverage ratio, showing BAHL’s prudence has not been compromised.

The interest rate cycle has dramatically reversed over the past few weeks. The ongoing times are unprecedented, and no one knows the extent of damage it presents to the economy – but the direction is very well known. BAHL, being a trade centric bank, may well be exposed to great uncertainty and a substantial decline in business volumes cannot be ruled out. These are testing times for everyone, and banks would not be an exception.