HBL, the country’s biggest commercial bank, announced its 1HCY22 financial results posting 11 percent year-on-year in pretax profits. The result was accompanied with a dividend of Rs1.5/share. The after tax profits though, understandably took a hit, as all sorts of taxes with retrospect, took the bottomline down 33 percent year-on-year. For context, HBL’s effective rate of taxation went up from 42 percent in the same period last year, to a mammoth 65 percent.

It was merry going for HBL otherwise, as it became the first bank in the country with a balance sheet in excess of Rs5 trillion. The deposit base expanded by 11 percent over December 2021 to Rs3.75 trillion, with the bank’s share in domestic deposits at 14.3 percent. The growth mainly came in low-cost current and saving deposits, with further improvement in CASA ratio. Fixed deposits, both domestic and international, went down from December 2021.

On the assets front, advances grew by 10 percent over December 2021, with growth spread across all lending businesses. The net interest income grew in double digits at the back of volumetric increase in asset base. The spreads marginally went lower in 1HCY22. The non-markup income continued to lend significant support, growing 34 percent year-on-year. Card business showed appreciable growth, supplemented by strong growth in cash management, branchless banking, merchant discount, and remittance operations.

Persistently high inflation took its toll on administrative expenses that jumped 27 percent year-on-year. That said the administrative costs remained flat quarter-on-quarter, improving the cost to income ratio from 59.6 percent in 1QCY22 to 55.1 percent in 2QCY22.

The ADR stayed flat at a little over 44 percent, whereas the loan quality remained healthy. The infection ratio came down to an all-time low to 5.1 percent, with an exemplary coverage ratio of 100 percent.

With the economic slowdown kicking in, next half could well be a slow-moving period in terms of economic activity and genuine credit appetite, given the high interest rates. That said, HBL’s investment portfolio in excess of Rs2.2 trillion is there to satiate government’s ever-rising borrowing appetite at lucrative rates. Asset tenor reprofiling could well be the order in the second half of 2022.