Bank Al Habib Limited (BAHL) posted a 4 percent year-on-year drop in pre-tax profits for 9MCY18. But the real story has been the impressive asset growth, especially that of the advances portfolio during the period. BAHL recorded an impressive double digit top-line growth during the period, largely owing to increased balance sheet size and higher interest rates over the previous year.

The bank’s advances portfolio saw an increase of a massive Rs110 billion or 32 percent over December 2017 to reach Rs450 billion. The ADR now stands at 58.5 percent – up from 49 percent in December 2017. With the interest rate cycle going in the north direction, advances are expected to yield better returns. The investment part of the asset mix, on the other hand, went down by a fourth to Rs359 billion, taking the IDR further down to 46.7 percent from 68.7 percent in December 2017.

On the liabilities front, the growth was steady, with the deposits base growing by a healthy 11 percent over December 2017 to Rs769 billion. Banks have usually been shy of lending to the private sector, but BAHL has on most occasions, been an exception. With the interest rates going high, and credit pick up strong, BAHL is expected to ride the rally and consolidate its position in the loan market share.

BAHL has had a clean loan book for quite some time, which continues to improve. The infection ratio is now down to just 1.12 percent, from 1.52 percent as on December 31, 2017. Whatever little NPLs there are, are more than adequately provided for. The only blip in an otherwise excellent P&L statement is the drop in gain on sale of securities – which is an industry wide phenomenon. The bank would also do well to limit its administrative expenses, in order to further improve the cost to income ratio.