The interest rates may well have gone drastically down from last year, banking profits have not. Habib Metropolitan Bank (HMB) announced its 1QCY21 financial results earlier this week, more than doubling its after-tax profits year-on-year. Unlike the bigger counterparts, HMB’s profitability growth was mainly driven by the core income.

The markup earned went understandably down, as the interest rates paint a completely different picture today than they did a year ago. The average earning assets saw a colossal year-on-year growth of 23 percent, but the volumetric growth in earning assets was overshadowed by the reduced policy rate.

Investments at Rs594 billion constitute the largest chunk of the asset base, showing an increase of 2 percent over December 2020, and 31 percent year-on-year, standing at Rs594 billion. The advances portfolio, on the other hand saw an increase of 24 percent year-on-year, and 11 percent over December 2020 to stand at Rs346 billion. The ADR, as a result improved to 48 percent, up from 46 percent in 1QCY20 – significantly higher than the ADRs being posted by the bigger banks this season, which has dropped to mid-30s.

HMB prides itself on trade finance, which continued to grow during the period. With the pandemic making a strong comeback and likely to result in reduced commercial activities, the second quarter could pose challenges in terms of business volume.

The deposit base grew 23.5 percent year-on-year to Rs715 billion. This is 5 percent higher over December 2020 – easily surpassing the industry deposit growth of less than 1 percent. The CASA deposit base increased by 7 percent over December 2020 to Rs441 billion. This yields a CASA ratio of 62 percent, an improvement from yesteryear, but HMB would be the first one to realize there is still a long way to go, in terms of improving the deposit mix further, to the levels some of the bigger banks have achieved.

Clarity on the interest rate front after the forward guidance by the central bank suggests there may not be a massive change in policy rate anytime soon. Pakistan’s macroeconomic indicators are looking up, but the ills of the pandemic have not completely gone away just yet, and that could continue posing challenges in the coming months. That said, HMB’s soundness indicators are in pretty good health, and the non-core income drivers have constantly contributed to the bottomline. This should keep HMB afloat even if things get trickier going forward.