Bank Al Habib Limited (BAHL) announced its 1QCY18 financial results last week, showing a 9 percent year-on-year drop in after tax profits. That said, the bank has continued to consolidate its balance sheet, showing growth in the right directions. The bank’s ADR now stands at 49 percent – and is expected to grow further given comparatively better interest rate scenario.

BAHL is not known as an aggressive lender, like most of its peers, which shows in the lion’s share of investments in the asset mix. The bank’s IDR was as high as 66 percent as of December end 2017. The advances portfolio grew by 3.7 percent as of March end 2018 over December 2017.

The growth in liability side is also steady recorded at 3.7 percent over December 2017. The CASA ratio continues to see improvements – and most of the fresh deposits last year and in 1QCY18 have been added in low cast categories of current and saving accounts. The yields on government papers, for quite some time, have been low, which would lead banks to lend more, should genuine credit demand arise.

In terms of profitability, the biggest hit came from reduced contribution from non-funded income, mainly that on gain on sale of securities. The bank still managed to receive strong support from other non funded income avenues such as fee, commission and brokerage income, which still forms the largest chunk of non mark-up income.

BAHL has a clean loan book in terms of NPLs, which have remained low and are more than adequately provided for. BAHL would do well to keep a lid on its administrative expenses, which grew in double digits, eroding the cost to income ratio. Going ahead, things have started looking up, both in terms of credit demand and interest rate scenario, and should spell beginning of a round of stronger profits for most banks in 2018.