Sitting on the industry's second largest asset portfolio, Habib Bank Limited (HBL) provides myriad of banking facilities and products, with key focus in retail and consumer banking. With around Rs 990 billion in assets as of 30th September, 2011, the bank's market share stood at around 13.4 percent. Above and beyond, the bank managed to rank as the largest commercial bank by deposit size as of 30th September, 2011, after its deposit base surpassed that of National bank of Pakistan in the third quarter CY11.
The bank runs 1,459 domestic branches (as of December, 2010), and has a wide international presence through 42 overseas branches.
Profitability Driven by higher operating revenues, HBL recorded a 28 percent, year-on-year growth in its bottom line during the first nine months of CY11. The bank's performance remained up to par with big banks, given that other three peer (giant private) banks, UBL, ABL and MCB cumulatively recorded 30 percent growth in their net profits during the period under review.
Hence, HBL rewarded investors with earnings per share of Rs 4.67 in 3QCY11; bringing the total EPS to Rs 13.10 in the first nine months of CY11 versus Rs 10.25 in the corresponding period last year.
Mark-up revenues Aided by higher investment income, the bank's top line shifted into a high gear. The bank's mark-up increased by 19 percent, year-on-year, to Rs 70 billion in 9MCY11. Revenues from investments accounted for nearly 38 percent of the top-line in 9MCY11, compared to 29 percent during the same period a year earlier.
This can be explained by inexorable growth in investment base, which edged up by 50 percent during the first nine months to Rs 368 billion as of September 30, 2011. As a result, the proportion of investments-to-deposits (IDR) increased by around 12 percentage points in the nine months under review to 46 percent. The expansion in HBL's investment portfolio came at the cost of lending. Advances portfolio stood at around Rs 407 billion at the end of September, 2011, down by 6 percent since the start of CY11.
As a result, the bank's advances to deposit ratio (ADR) stepped down by 10 percentage points during the first nine month of CY11 to 51 percent at the end of September, 2011. At this level, HBL's ADR is nearly 6 percentage points below the top five bank's average ADR.
Mark-up expenses On account of expansion in liabilities, the bank's mark-up expenses rose by 18 percent, year-on-year, to Rs 30 billion during the first nine months of CY11. Since the bank's deposit base grew by sizeable 11 percent during the first nine months to Rs 802 billion at the end of September, 2011, it outdid the banking industry, given that deposit base for all commercial banks grew by 6 percent in the period under consideration.
The bank strengthened its market leadership in attracting deposits, as its market share increased by 72 bps in the first nine months to 14.8 percent by the end of September.
However, expansion in fixed deposit base drew CASA down by 2 percentage points to 70 percent as of September 30, 2011.The bank's fixed deposit portfolio expanded by a whopping 23 percent during the period under review to Rs 230 billion as of 30th September, 2011.
Net interest income The bank managed to rake in Rs 40 billion in net interest income in 9MCY11, nearly 19 percent higher compared to the same period a year earlier. This could be attributed to improvement in the banking industry's spread, given that the industry's spread ratio averaged around 7.65 percent in 9MCY11, nearly 22 bps higher compared to the same period a year earlier.
Similarly, the bank has been able to marginally improve gross spread ratio, which increased by 17 bps, year on year, to around 57 percent in 9MCY11. At this level, the bank's gross spread ratio was notch above the group of top five banks, with average gross spread ratio of 55 percent.
Non-markup expenses and income In consideration of higher investment banking fees and significant improvement in income from dealing in foreign currencies, the non markup income accrued a gain of 18 percent. The bank's non-markup income accounted for nearly 19 percent of the total operating income as compared to 21 percent for the group of top five banks.
Whereas, the banks administrative expenses increased by around 13 percent for all the three quarters combined. However, the good part is that the bank income to expense ratio improved to 2.39 in 9MCY11, from 2.27 same period a year earlier.
Non-performing loans (NPLs)The bank managed to fetter growth in non-performing loans, given that toxic loans grew by 10 percent during the first nine months of CY11 to Rs 51 billion at the end of September 2011. Higher NPLs lifted the banks' infection ratio by 1.6 percentage points to 11.4 percent at the end of September. The bank' s infection ratio is higher compared to MCB and ABL at 10 percent and 8 percent respectively, and lower compared to NBP and UBL, at 20 and 15 percent, respectively.
Even though NPLs registered growth, higher provisioning expense slightly improved the banks coverage ratio to 82.9 percent as of September 30, 2011, from 82.3 percent as of December 31, 2010.
Rating HBL is currently rated as 'AA+/A-1+', with stable outlook, according to JCR-VIS Credit Rating Company Limited.
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HABIB BANK LIMITED
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(Rs mn) 1HCY11 1HCY10 chg
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Markup Earned 70,134 59,016 19%
Markup Expensed (30,088) (25,420) 18%
Net Markup Income 40,046 33,596 19%
Provisioning (6,343) (5,075) 25%
Net Markup income after provisions 33,703 28,521 18%
Other income 9,307 7,904 18%
Operating revenues 49,353 41,500 19%
Other expenses (20,666) (18,260) 13%
Profit before taxation 22,345 18,165 23%
Profit after taxation 14,435 11,293 28%
EPS (Rs) 13.10 10.25
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Source: Company Accounts
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