Bank Al Habib Limited (BAHL) had a stellar six-month period ending June 30, 2020. The financial results for 1HCY20 announced earlier this week, show the bank registered a massive 62 percent year-on-year growth in profits – driven primarily by a very strong topline growth, which trickled all the way down to the bottomline.

The balance sheet growth continued in double digits as the asset base expanded by 18 percent over December 2019 to a little over Rs1.5 trillion. The net markup income growing by 39 percent year-on-year is reflective of strong volumetric growth in earning assets, despite significantly reduced interest rates in the second half of the period.

The advances side of the asset portfolio showed a rather modest growth of 4.4 percent over December 2019 to Rs510 billion. BAHL boasts of an enviably clean loan portfolio, as evidenced by the non-preforming loans to gross loans ratio staying at an exemplary 1.54 percent for the period. The bank made additional provisions of Rs1.25 billion over and above the SBP requirement, keeping in view the pandemic. The bank has relied heavily on prudent strategies in terms of building loan portfolio. The ADR dropped from 54 percent in December 2019 to 49 percent as at June end, 2020.

The asset mix is heavily tilted towards investment, as depicted by the investment to deposit ratio of 76 percent, up from 65 percent in December 2019. This has been an industry wide trend, as most banks offered to park excess liquidity in safer government securities with decent earning yields. The investment composition may change, in terms of tenure buildup, now that the interest rates have hit a new bottom. The investments grew rapidly over December 2019, closing in at Rs793 billion, up by 15 percent.

On the liabilities front, BAHL outgrew the industry deposit growth in becoming the latest bank to join the trillion-rupee mark. The 15 percent growth over December 2019 took the deposit base to a little over Rs1 trillion. BAHL has worked extensively on improving its deposit mix and CASA improvement has been a continuous trend since many quarters.

The non-markup income went down slightly, mostly due to lackluster economic activities especially during the second quarter. The fee and commission income went down during 2QCY20 as the pandemic slowed down the economic activity. The earning on foreign exchange also dipped during second quarter, and there was not much to show for on account of sale of securities.

BAHL seems to have weathered the storm rather well, given that it is a trade centric bank. The return of trade to near normalcy earlier than expected, should bode well for BAHL. The economic activity should pick up now that the interest rates are also very attractive for the borrower.