Habib Bank Limited (HBL), starting commercial operations on 25th August 1941 with its first branch in Bombay in 1947, was the first commercial bank of Pakistan, when 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 registered office and principal offices are situated at Habib Bank Plaza, one of the tallest buildings in the country and a landmark in Karachi. HBL operates 1425 branches (2004: 1,424) inside Pakistan and 45 branches (2004: 47) outside the country.
HBL is the holding company of the following companies, of which the first is 90% 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; and (vi) First Habib Bank Modaraba, Pakistan. The consolidated financial statements of the Group for the year ended December 31, 2005 comprise of HBL and its subsidiaries (together referred to as the Group) and the Group's interest in its associated and jointly controlled entities.
The Overview hereunder is of the consolidated financial statements.
Management control of HBL was transferred to Aga Khan Fund for Economic Development, S.A., Switzerland after signing of agreement with the Privatisation Commission, Government of Pakistan on February 26, 2004. As such, the year ended December 31, 2005 is the first 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, 2005, the SBP and the A KFED are the two major shareholders of HBL, with shareholding at 60.5% and 38.5% respectively. The SECP, NBP (Trustee Department) and the Privatisation Commission have insignificant shareholding.
Total assets of HBL Group saw 8% increase to Rs 529 billion on December 31, 2005 compared to Rs 488 billion as on December 31, 2004. On December 31, 2005 Investments declined by 20% to Rs 107 billion (20% of Total Assets) compared to Rs 134.5 billion (28% of TA) as on December 31, 2004. Of the total, HBL has 80% investments in Available for Sale Securities (2004: 78%).
HBL's Advances as on December 31, 2005 were Rs 317 billion (60% of Total Assets), registering 22% increase over 2004 Advances at Rs 259 billion (53% of TA). On December 31, 2005, 85% Advances (2004: 83%) are in local currency, while 68% (2004: 63%) of the total Advances are for short term. Major exposure of HBL on December 31, 2005 is in Textile (26%), Chemicals & Pharmaceutical (2%), Agribusiness (7%), Cement (5%), Financials (2%), Public Sector (10%), General Traders (2%), Automotives (2%), and Others including Individuals (44%).
As on December 31, 2005, the authorised capital of HBL stood at Rs 13.8 billion comprising 1,380 million ordinary shares of Rs 10 each. The paid up capital on this date was Rs 6.9 billion. As on December 31, 2005 gross NPLs are Rs 31.360 billion (2004: Rs 44.506 billion). In percentage terms gross NPLs on December 31, 2005 are 12% of gross Advances (2004: 15% of GA). On Net basis, NPLs are 2.47% of Advances as on December 31, 2005 (2004: 4.32% of Advances).
It may be noted that 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 revenues of HBL for 2005 increased by 43% to Rs 40 billion compared to Rs 28 billion for the previous year. Net interest income (after provisions) for 2005 experienced almost 100% increase to Rs 22 billion (2004: Rs 11.4 billion). Total mark up-interest expense represented 23 % of total mark up income for 2005, compared to 25% for 2004. Against expectations, there has been 2% average decline in the payout by the bank to the Depositors.
Non-mark up income of the bank for 2005 was lower at Rs 7.8 as against Rs 9.8 billion for 2004. The year 2005 was closed with After-tax Profit attributable to HBL shareholders at Rs 9.56 billion (2004: Rs 5.67 billion). ROE for the year is attractive at 23.8% (2004: 18%). Cash dividend proposed to be paid to the shareholders was 10% (2004: 5%). Performance statistics are given below.
Regarding Commitments in respect of forward lending it has been said in the notes that "the Group makes commitments to extend credit in the normal course of its business but none of these commitments are irrevocable and do not attract any significant penalty or expense if the facility is unilaterally withdrawn". The borrowers mostly do like unilateral withdrawals and HBL might reconsider this stance.
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Performance Statistics Consolidated
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Balance Sheet (Audited) (Rs million)
As on Dec. 31, 2005 2004
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Total Assets: 528,894 487,765
Cash & banks: 64,865 65,389
Lending, fin. Institutions: 12,272 3,755
Investments-Net: 107,384 134,523
Advances-Net: 316,882 259,089
Borrowing, fin. Institutions: 34,905 29,346
Deposits, other accounts: 432,545 404,629
Total Liabilities: 488,406 455,740
Net Assets: 40,488 32,025
Share Capital: 6,900 6,900
Reserves & Un-app. Profit: 25,131 16,205
Sub total: 32,031 23,105
Minority Interest: 847 835
Surplus on Revalue, Assets: 7,610 8,085
Equity incl. Revalue Surplus: 40,488 32,025
Subordinated Loan: 0 0
Equity & Sub. Loans: 40,488 32,025
Advances-Gross: 350,425 292,398
Gross NPLs: 41,360 44,506
Total Provision: 33,543 33,309
Conting. & Commitments: 216,689 213,998
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Ratios:
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Cash & bank/Total Assets: 12% 13%
Investments/Total Assets: 20% 28%
Advance-Net/Total Assets: 60% 53%
NPLs/Advances-Gross: 11.8% 15.2%
NPLs/Total Equity: 102% 139%
NPLs Prov./Advances-G.: 9.6% 11.4%
Deposits/Total Assets: 82% 83%
Total Liabilities/Total Assets: 92% 93%
Total Equity/Total Assets: 7.7% 6.6%
Equity & Sub. Loans/TA: 7.7% 6.6%
Deposits/Equity-Times: 10.7 12.6
Advances/Deposits: 73% 64%
Investments/Deposits: 25% 33%
Contin.& Com./Equity-Times: 5.35 6.68
Book Value Per Share: 58.68 46.41
Quoted Price () - Rs: Not Quoted Not Quoted
Price/Book Value Ratio: Not Quoted Not Quoted
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Income Statement 2005 2004
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Markup-interest earned: 32,343 18,199
Markup-interest expensed: 7,327 4,472
Net Markup-interest income: 25,016 13,727
Provisions and write offs: 3,021 2,308
Net markup income(aft. Prov.): 21,995 11,419
Total non-markup income: 7,854 9,862
Income bef. Admn. Exp.: 29,849 21,281
Admin Expenses, etc: 14,413 14,034
Profit before Taxation: 13,834 7,247
Current & deferred tax: 4,188 1,484
Profit after taxation: 9,646 5,763
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Ratios: (Annual Basis)
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Markup earned/Total Assets: 6.1% 3.7%
Net Markup Income/TA: 4.7% 2.8%
Net markup (aft. Prov.)/TA: 4.2% 2.3%
Non-Markup Income/TA: 1.5% 2.0%
Income before AE/TA: 5.6% 4.4%
Admin Expenses/TA: 2.7% 2.9%
Profit before Taxation/TA: 2.6% 1.5%
Profit after taxation/TA: 1.8% 1.2%
Profit after tax/Total Equity: 23.8% 18.0%
EPS- (Y.-end paid up) - Rs: 13.86 8.22
Price/Earnings Ratio: Not Quoted Not Quoted
Cash Dividend: 10% 5%
Bonus Shares: 0% 0%
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Cash flow Summary 2005 2004
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Net Cash flow, Operations: -449 11,468
Net Cash flow, Investing: 604 5,066
Net Cash flow, financing: 0 0
Change in Net Liquidity: -525 17,437
Net Liquidity at beginning: 65,390 47,952
Net Liquidity at end: 64,865 65,389
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