Commercial Banks: HABIB BANK LIMITED - Year Ended December 31, 2006 (Audited)
Habib Bank Limited (HBL) had started commercial operations on August 25, 1941 with its first branch in Bombay. HBL had opened its office in Karachi in 1943 and it became the first commercial bank of Pakistan, when in 1947 it shifted its head office to Karachi.
HBL, incorporated in Pakistan, is engaged in commercial banking, Modaraba management and related services in the country and overseas. Its principal office is situated at Habib Bank Plaza, one of the tallest buildings in the country and a landmark of Karachi. The bank operates 1437 branches (2005: 1,425) inside Pakistan and 40 branches (2005: 45) outside the country. HBL has been a pioneer in providing innovative banking services.
Management control of HBL was transferred to Aga Khan Fund for Economic Development, S.A., Switzerland (AKFED) after signing of agreement with the Privatisation Commission, Government of Pakistan on February 26, 2004. As such, the year ended December 31, 2006 is the second full year under the new management. JCR-VIS has assigned entity rating in the medium and long term at "AA" (Double A) and "A-1+" for the short term.
As at December 31, 2006, AKFED with 51% shareholding is the controlling shareholder. Holding by the State Bank of Pakistan is now 48.047%. The remaining shares are held by SECP, NBP (Trustee Department) and the Privatisation Commission. HBL shares are not yet listed on any stock exchange. HBL is the holding company of the following companies, of which the first is 90.5% owned while the rest are wholly-owned: (i) Habib Allied International Bank Plc., UK; (ii) Habib Finance International Limited, Hong Kong; (iii) Habib Finance (Australia) Limited, Australia; (iv) Habib Bank Financial Services (Private) Limited, Pakistan; (v) Habib Currency Exchange (Private) Limited, Pakistan; (vi) HBL Asset Management Limited, Pakistan; and (vii) First Habib Bank Modaraba, Pakistan. The Overview hereunder, however, is that of HBL alone, without consolidation with its subsidiary companies.
HBL has investment in the following foreign associated/joint ventures: Himalayan Bank Limited, Nepal (holding 20%); PlatinumHabib Bank Plc, Nigeria (15%); and Diamond Trust Bank Limited Kenya (3%). In Pakistan, HBL has following associated companies: Central Depository Company (holding 9.83%); First Women Bank Limited (26.78%); Investment Corporation of Pakistan (19.98%); Khushhali Bank (17.60%); National Institution Facilitation Technologies (Private) Limited (9.07%); The Resources Group (Pak) Limited (7.02%); and TMT PKIC Incubation Fund 10.00%).
Total assets of HBL as on December 31, 2006 saw 11% increase to Rs 563 billion compared to Rs 506 billion as on December 31, 2005. On December 31, 2006 Investments show 16% increase to Rs 119 billion (21% of Total Assets) compared to Rs 103 billion (20% of TA) as on December 31, 2005. Of the total, HBL has 80% Investments as on June 30, 2006 in Available for Sale Securities (2005: 77%).
HBL's Advances as on December 31, 2006 were Rs 336 billion (60% of Total Assets), registering 9% increase over 2005 Advances at Rs 308 billion (61% of TA). On December 31, 2006, 86% Advances (2005: 87%) were in local currency, while 64% (2005: 69%) of the total Advances were for short term. Major exposure of HBL on December 31, 2006 was in Textile (19%), Chemicals & Pharmaceutical (4%), Agribusiness (8%), Cement (3%), Financials (1%), Public Sector (10%), General Traders (3%), Automotives (2%), and Others including Individuals (35%).
As on December 31, 2006 gross NPLs were Rs 34 billion (2005: Rs 36 billion). In percentage terms gross NPLs on December 31, 2006 were 9.4% of gross Advances (2005: 10.6% of GA). On Net basis, NPLs were 2.4% of Advances as on December 31, 2006 (2005: 2.5% of Advances). For the year 2006, HBL has made full provision against NPLs according to the SBP criteria. However, as some doubtful loans have the tendency to stay under cover for sometime due to different reasons, a prudent policy for HBL would be that the management remains extra vigilant in the appraisal and monitoring of all loans.
Total mark up income of HBL for 2006 increased by 36% to Rs 42 billion compared to Rs 31 billion for the previous year. Net interest income (after provisions) for 2006 experienced 26% increase to Rs 27 billion (2005: Rs 21 billion). Total average mark up-interest expense represented 30 % of total mark up income for 2006, compared to 22% average mark up expense for 2005. There has been small increase in the payout by the bank to the Depositors. Non-mark up income of the bank for 2006 was 41% higher at Rs 10 billion as against Rs 7 billion for 2005.
HBL's Profit before Tax for 2006 rose by 56% to Rs 20.5 billion compared to Rs 13 billion for the previous year. The bank closed the year 2006 with After-tax Profit at Rs 14 billion (2005: Rs 9 billion). ROE for the year is very attractive at 26.9% (2005: 22.4%). Performance statistics are given below.
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Performance Statistics
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Balance Sheet (Audited)
(Rs million)
As on December 31, 2006 2005
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Total Assets: 562,916 506,068
Cash, balances with banks: 69,777 56,319
Investments-Net: 119,129 102,985
Advances-Net: 335,985 307,603
Borrowing from fin. Institutions: 49,981 30,161
Deposits, other accounts: 439,724 416,603
Total Liabilities: 509,804 466,337
Net Assets: 53,112 39,731
Share Capital: 6,900 6,900
Reserves & Un-app. Profit: 38,865 25,222
Equity: 45,765 32,122
Surplus on Revalue, Assets: 7,347 7,609
Equity incl. Revalue Surplus: 53,112 39,731
Advances-Gross: 361,913 335,445
Gross NPLs: 34,038 35,623
Total Provision for NPLs: 25,928 27,842
Conting. & Commitments: 162,573 136,320
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Ratios:
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Cash & bank/Total Assets: 12% 11%
Investments/Total Assets: 21% 20%
Advance-Net/Total Assets: 60% 61%
NPLs/Advances-Gross: 9.4% 10.6%
NPLs-Net/Advances-Net: 2.4% 2.5%
NPLs Prov./Advances-Gross: 7.2% 8.3%
Deposits/Total Assets: 78% 82%
Total Liabilities/Total Assets: 91% 92%
Total Equity/Total Assets: 9.4% 7.9%
Deposits/Equity-Times: 8.3 10.5
Advances/Deposits: 76% 74%
Investments/Deposits: 27% 25%
Conting.& Comm./Equity-Times: 3.06 3.43
Book Value Per Share: 76.97 57.58
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Income Statement (Y end December 31)
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2006 2005
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Markup- interest earned: 42,152 31,042
Markup- interest expensed: 12,504 6,741
Net Markup-interest income: 29,648 24,301
Provisions and write offs: 2,802 3,023
Net mark up income (aft. Prov.): 26,846 21,278
Total non-markup income: 10,146 7,174
Income bef. Admn. Exp.: 36,992 28,452
Admin Expenses, etc: 14,766 13,686
Profit before Taxation: 20,502 13,163
Current & deferred tax: 6,226 4,247
Profit after taxation: 14,276 8,916
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Ratios: (Annual Basis)
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Markup earned/Total Assets: 7.5% 6.1%
Net Markup Income/TA: 5.3% 4.8%
Net markup (aft. Prov.)/TA: 4.8% 4.2%
Non-Markup Income/TA: 1.8% 1.4%
Income before AE/TA: 6.6% 5.6%
Admin Expenses/TA: 2.6% 2.7%
Profit before Taxation/TA: 3.6% 2.6%
Profit after taxation/TA: 2.5% 1.8%
Profit after tax/Total Equity: 26.9% 22.4%
EPS- (year-end paid up) - Rs: 20.69 12.92
Cash Dividend: 30% 5%
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Cash flow Summary 2006 2005
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Net Cash flow, Operations: 15,491 812
Net Cash flow, Investing: -1,341 -87
Net Cash flow, financing: -692 -345
Change in Net Liquidity: 13,458 380
Net Liquidity at beginning*: 56,319 55,939
Net Liquidity at end: 69,777 56,319
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NOTE: : (*After adjusting exchange rate changes in cash, cash equi.)
COMPANY INFORMATION: : President and CEO: R. Zakir Mahmood; Director: Shaukat Hayat; Durrani Director: Arif Mansur; SEVP/Group Chief Financial Officer: Ayaz Ahmed; SEVP/Group Executive Audit, BRR & Investigation: Salim Amlani; SEVP/Group Executive Global Compliance: Mudassir H. Khan; Auditors: KPMG Taseer Hadi & Co, Chartered Accountants; Registered Office: Habib Bank Tower, 4th Floor, Jinnah Avenue, Islamabad; Head Office: Habib Bank Plaza, I.I. Chundrigar Road, Karachi; Web Address: www.habibbankltd.com
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