Bank Al Habib Limited (BAHL) announced its 1HCY18 financial results, posting a 5 percent year-on-year drop in after-tax profits. But the real deal was the massive balance sheet growth, as the asset base increased by 9 percent over December 2017, reaching Rs1 trillion. BAHL’s top-line grew impressively in double digits, thanks mainly to the increased balance sheet size.

Relatively better interest rates during the period as compared to the previous period also played the part in a healthy net mark-up income growth. BAHL’s has been slowly but surely working to improve the deposit mix. The deposit base grew by an 8 percent over December 2017 to Rs748.8 billion. While the breakdown of deposits is not known yet, it is safe to assume BAHL continued its journey towards further improving the CASA ratio – a glimpse of which could be seen from better gross spreads during 1HCY18.

The bank’s ADR now stands at a very healthy 59.5 percent, which is an improvement of over 10 percentage points from December 2017. BAHL has a clean loan book in terms of NPLs, which have remained low and are more than adequately provided for. The infection ratio has further reduced from an already low 1.52 percent in December 2017 to 1.13 percent. The coverage to the NPLs has remained high at 145 percent.

In terms of profit and loss, the biggest blow was dealt from the decrease in non mark-up income, mainly on account of reduced gain on sale of securities. That said, the bank reported sizeable increase in fee, commission and brokerage income during the period. Furthermore, income from foreign currency dealing also contributed a good chunk to the non-core income.

With the interest rate cycle believed to be reversing, and given the recent up tick in the advances portfolio of BAHL, it increasingly looks that the shift from being heavily reliant on investments to advances may have already started. With a largely clean balance sheet, and an ever improving CASA ratio, the bank seems well poised to cash in on the opportunities ahead.