Bank Al Habib: Firm and steady

Bank Al Habib Limited (BAHL) saw its after tax profits grow by a massive 87 percent year-on-year, for the nine-month period ending September 30, 2020. The stellar performance was driven by strong income, both in the markup and non-funded segments. The bank managed to keep the bottomline up despite making higher than usual provisions in the wake of Covid-19.

BAHL’s continued to consolidate strong growth in the balance sheet, as the asset base expanded by 21 percent over December 2019, at Rs1.56 trillion. The asset mix remains heavily favoured towards investments in securities, as loan demand from private sector remained subdued due to a variety of factors at play during the period, primarily the coronavirus.

The investments grew by a whooping 39 percent over December 2019 and stood at Rs813 billion. The strong net markup income growth of 47 percent is reflective of the volumetric growth in earning assets. The yields on investments declined substantially from last year, but the sheer volume growth and better deposit mix, helped BAHL register a strong topline.

The significantly altered dynamics of the interest rates have resulted in an entirely changed composition of the investment portfolio. BAHL too, altered the investment portfolio as per the interest rate scenario. The advances growth was rather muted at 7 percent over December 2019, as economic activity remained dull, for most part of the 9MCY20 period. The advances have moved up to Rs523 billion, with an ADR of 48 percent, down from 54 percent in December 2019.

The non-funded income grew modestly at 7 percent year-on-year, but even a modest growth in times when trade activities were substantially reduced and the footfall was low, especially during 2QCY20, is nothing short of an achievement. The bank witnessed higher growth in administrative expenses, than it would have ideally wanted, which put pressure on the cost to income ratio.

On the liabilities front, the growth was phenomenal at 20 percent over December 2019, as the deposit base increased by Rs185 billion to Rs 1.09 trillion. The growth in non-remunerative deposits outpaced fixed deposits, having grown by 21 percent over December 2019, recorded at Rs410 billion. BAHL has been steadily improving its CASA ratio over the past few quarters, which is of paramount importance in times of squeezed spreads and an economy struggling to recover quickly.