Habib Bank posts profit, delivers dividends

KARACHI: Habib Bank Limited (HBL) took a beating in the stock market after it announced its profitability slipped 4.88 percent to Rs6.597 billion for the quarter ended June 30, 2017, compared to Rs6.936 billion in the same period last year, analysts said on Friday.

“The decline in profitability is mainly driven by margin compression post maturity of high yielding Pakistan Investment Bond (PIBs) in the third quarter of 2016 and an uptick in non-markup expense,” said Umair Naseer in a report issued by Topline Securities.

Due to lower margin on PIBs, Net Interest Income (NII) of HBL remained flat at Rs21.27 billion containing bottom-line growth of the company. Also, bank’s total non-interest income stood at Rs8.12 billion for the outgoing quarter as against Rs7.786 billion last year.

 “Growth in non-interest income was supported by 10 percent higher fee income and 86 percent growth in the income from dealing in foreign exchange,” said Amreen Soorani, an analyst at JS Global Capital. 

According to a company announcement, the earnings per share (EPS) of the bank for the quarter under review stood at Rs4.41, down 6.3 percent as against EPS of Rs4.71 same period last year. The bank has also declared an interim dividend of Rs3.5/share, which is in addition to the dividend of Rs3.5/share already paid to the shareholders.  

For the half year ended June 30, 2017, HBL posted a net profit of Rs15.677 billion translating into EPS of Rs10.56 compared to Rs15.97 billion and Rs10.86 last year. 

HBL deposits have crossed the Rs2 trillion mark, driving a 7.4 percent growth in the balance sheet, to Rs 2.7 trillion. In the first six months of 2017, the bank added over Rs105 billion in domestic CASA deposits, and the ratio of domestic current accounts rose to 35.1 percent in June 2017. Increasing demand for private sector credit has resulted in strong lending growth with net advances increasing by 11 percent to Rs 831 billion.

With all business segments registering significant increases, average domestic loans for H1 17 grew by 28 percent over H1 16, and average domestic current accounts increased by 17 percent for the same period.

Consequently, despite the spread compression prevalent across the industry, HBL was able to maintain its net interest income for the half year ended June 30, 2017 at the previous year’s level of Rs41.4 billion.

Non mark-up income continued to deliver a strong performance across all business lines, growing by 14 percent over H1 16 to reach Rs16.4 billion. Fees and commissions increased by 9 percent to Rs10.2 billion, with the growth coming from core banking businesses, asset management and home remittances.

Despite the overall decrease in remittances into Pakistan, HBL successfully channeled higher flows through its counters, further strengthening its market leadership with a 26.6 percent share. Income from treasury related activities increased by 21 percent, to Rs3.9 billion and contribution from the Bank’s affiliates rose by 29 percent to Rs1.9 billion. Non-performing loans reduced further, and total provisions for H1 17 reduced by 19 percent compared to H1 16. The infection ratio reduced to 8.4 percent and the coverage ratio strengthened further, to 92.5 percent.

Analysts have flagged imposition of fine on New York operation, delay in an expected hike in interest rates next year, lower than expected advances growth and deterioration of Pakistan macros as key risks for the bank.