The country’s largest bank released its CY13 results yesterday. HBL posted a three percent year-on-year top line growth, which translated into an after-tax profit of Rs23billion, up one percent year on year. The result was also accompanied with 20 percent (Rs2 per share) cash dividend translating into a full-year cash payout of Rs8 per share besides 10 percent bonus shares.
While the bank generally finds safe-haven in government securities, during CY13, the bank focused on advancing loans to private sector. This is evident from a healthy 13 percent year-on-year growth in advances while investments posted a marginal uptick of four percent year on year in CY13.
The bank had significantly improved its low-cost deposits in an effort to improve its performance. As of December 2013, HBL’s CASA clocks in at 73 percent as against 67 percent in CY12. However, a 100 basis points rise in the minimum rate on saving deposits during CY13 and its linkup with the repo-rate in October 2013 turned unpleasant for the bank as its Net Interest Margin (NIM) shrank by five percent year on year in CY13, rendering a spread ratio of 46 percent in CY13 vis-à-vis 49 percent in CY12. Bear in mind, saving deposits constituted 44 percent of HBL’s total deposits as of December 2013.
NPLs dropped by seven percent year on year in CY13 which enabled the bank to book lesser provisions. Besides, HBL also availed the benefit of Forced Sales Value (FSV) during the period which reduced its provisioning expenses. Overall, provisioning expenses fell by 79 percent year on year in CY13.
HBL’s non-mark-up income continued to shine in CY13, forming 14 percent of the bank’s total revenue against 12 percent in CY12.
The bank’s acquisition of Citibank’s credit card portfolio and other initiatives, such as its strategic partnerships with Chevron, Daewoo, and PSO improved its non-funded income. HBL also launched its internet banking facility under the product name ‘HBL Express’, offering money transfer utility bills payment facility.
As part of its continued focus on income diversification, HBL has also collaborated with NADRA whereby NADRA e-sahulat centers will provide branchless banking services under the name ‘HBL Express’. Reportedly, HBL has also started issuing EMV Visa debit cards.
Besides, dividend income and capital gains on the sale of securities also posted tremendous growth in CY13, cumulatively resulting in a 21 percent year-on-year growth in non-funded income.
All in all, amid drop in spreads, lower provisioning expenses and healthy non-core income were the bottom line drivers for CY13. However, the support provided by these accounts was eclipsed by a 17 percent year-on-year growth in non-mark-up expense.
Going forward, the improving credit profile of the bank will likely keep a check on its provisioning expenses. Besides, flourishing non-mark-up income may also rally the bottom line. What needs to be focused on is shrinking spreads, which solicit a revisit of asset and deposit mix. While the bank showed some improvement in its asset mix in CY13 by focusing on advances, deposits are still tilted in favour of saving deposits, hence pleading attention.
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HABIB BANK LIMITED (CONSOLIDATED P&L)
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Rs (mn) CY13 CY12 Chg
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Markup Earned 120,223 116,773 3%
Markup Expenses 65,207 59,012 10%
Net Markup Income 55,016 57,760 -5%
Provisioning/(Reversal) 1,400 6,767 -79%
Net Markup Income after provisions 53,616 50,993 5%
Non Mark-up / Interest Income 19,323 15,960 21%
Operating Revenues 72,939 66,953 8.9%
Non Mark-up / Interest Expenses 36,806 31,392 17%
Profit Before Taxation 36,133 35,562 1.6%
Taxation 13,106 12,770 2.6%
Profit After Taxation 23,027 22,792 1%
EPS (Rs) 17.15 17.02 0.8%
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Source: KSE Notice
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