Habib Metropolitan Bank lost its top line to rate cuts in CY13 as it didn focus on building up its earning assets to combat the same.
As of 9M CY13, the banks investments dipped by 16 percent year on year while advances showed a modest uptick of 3 percent year on year. While the weak top line could wreak havoc on the bottom line by squeezing the spreads, HMBs indolence on the deposit front yielded fruits by buttressing the margins.
As of September 2013, deposits had boasted a meager 3 percent year-on-year growth. A 21 percent year-on-year drop in the mark-up expenses in CY13 indicates that the deposits might have posted no overwhelming growth in 4Q CY13. In effect, the banks spread ratio grew from 31 percent in CY12 to 37 percent in CY13.
HMB had been booking lower provisions vis-à-vis similar period of last year until 9M CY13. This could be attributable to a drop in NPLs. However, in 4Q CY13, the banks provisioning expenses grew by 18 percent year on year. The detailed financial accounts will reveal whether this is the consequence of growth in NPLs in 4Q CY13 or the bank booked higher provisions just to increase its loan coverage preemptively. On the whole, provisioning dropped by 22 percent year on year in CY13.
Non-mark-up heads turned out to be sour for the bank. Non-mark-up income fell by 2 percent year on year in CY13 on the back of a massive decline in dividend income while other non-mark-up income heads boasted growth. Besides, HMB added over a dozen new branches to its network during CY13, which pushed up its mark-up expenses by 10 percent year on year during the period.
The bottom line ended up growing 4 percent year on year in CY13. Although, the bank posted bottom line growth yet that didn come on the back of encouraging fundamentals; lower provisioning expense and subdued deposit growth which arrested the growth in mark-up expense were the main growth drivers for the bottom line. The silence on assets and deposits front shows that the bank passed CY13 catching forty winks.
HMBs saving deposits that have been growing over the years made up 31 percent of its total deposits as of 9M CY13. The growth needs to be seized in the coming times in order for the bank to reap fruits from the discount rate hike. Besides, HMB also needs to focus on the non-funded heads which unlike other banks are not supporting HMBs bottom line.
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HABIB METROPOLITAN BANK LIMITED (UNCONSOLIDATED P&L)
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Rs (m n) CY12 CY13 Chg
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Markup Earned 28,551 24,628 -14%
Markup Expenses 19,665 15,577 -21%
Net Markup Income 8,886 9,052 2%
Provisioning (Reversal) 2,694 2,109 -22%
Net Markup Income after provisions 6,192 6,942 12%
Non Mark-up / Interest income 4,879 4,794 -2%
Operating Revenues 11,071 11,737 6%
Non Mark-up / Interest Expenses 6,027 6,625 10%
Profit Before Taxation 5,044 5,112 1%
Taxation 1,638 1,585 -3%
Profit Alter Taxation 3,406 3,526 4%
EPS (Rs) 3.25 3.37 4%
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Source. KSE Notice
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