The banking analysts were predicting a substantial rise of around 15 percent year-on-year in the net interest margin (NIM) of HBL in 1QCY14. The expectations were backed by the fact that asset re-pricing had to take place in 1HCY14 to reflect the discount rate-hike while liability-side re-pricing had already taken place in the 4QCY13. However, a negligible growth of 0.1 percent in the topline defies the expectations of asset re-pricing.
Connecting the dots, HBL has realized a momentous growth of around 3 times which signals that HBL has offloaded a huge portion of its investments in 1QCY14 which gives some meaning to top line uptick of just Rs22 million over 1QCY13.
The detail financial statements are awaited to confirm the deposit growth in 1QCY14; however, by the look of things, it appears that the liability re-pricing done earlier by the bank and perhaps a soft deposit growth in 1QCY14 saved the day for HBL and pushed NIM up by a decent 8 percent year-on-year during the period.
Besides lower mark-up expenses, the other bottomline propellers were considerably low provisioning charges and huge non-mark-up income that came on the back of capital gains, income from dealing in foreign currencies, share of profit from associates and also “other income”.
Although NIM was below the industrywide expectations, other factors lent their hand to rescue the bottomline which boasted a 20 percent year-on-year jump with the announcement being accompanied with an interim cash dividend of Rs2 per share in 1QCY14.

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HABIB BANK LIMITED (CONSOLIDATED P&L)
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Rs (mn)                              1QCY14   1QCY13     Chg
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Markup Earned                        31,326   31,304    0.1%
Markup Expenses                      17,077   18,117     -6%
Net Markup Income                    14,249   13,187      8%
Provisioning/ (Reversal)                301    1,309    -77%
Net Markup Income after provisions   13,948   11,878   17.4%
Non Mark-up / Interest Income         5,674    3,862     47%
Operating Revenues                   19,622   15,740     25%
Non Mark-up / Interest Expenses      10,194    7,834     30%
Profit Before Taxation                9,428    7,906     19%
Taxation                              3,301    2,808     18%
Profit After Taxation                 6,127    5,098     20%
(Loss) / earnings per share            4.54     3.77
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Source: KSE Notice
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