While a few large banks are celebrating reaching the trillion rupee mark in terms of deposit – the largest of them all, HBL crossed a trillion rupees in advances. Pakistan’s large commercial bank, HBL announced its annual financial results for CY18, amassing a 41 percent year-on-year jump in after tax profits. The pretax profits were subdued owing to a massive increase in provisioning charges, but the massive reduction in effective tax rate for the year, helped HBL post a massive profit growth.

The balance sheet story was almost all about advances growth, where HBL added more than Rs200 billion throughout the year – registering an increase of 27 percent over December 31, 2017. As a result, the bank’s ADR has now crossed 50 percent – up significantly from 42.6 percent last year. The investments growth stayed rather muted, and understandably so, given the interest rate environment. HBL shuffled the investment portfolio from long term PIBs to short term treasury bills.

The deposit growth was steady at 7 percent – breaching Rs2 trillion – maintaining the market leader status by some distance HBL’s deposit mix continues to improve as the bank strives for a higher CASA ratio, which becomes ever so important in times of thin spreads. Current deposits now constitute of nearly 38 percent of the total deposit mix – which have outpaced the growth in other deposits, growing at 15 percent. Of the incremental deposits in CY18, nearly 58 percent were current deposits, which should serve the bank well going forward in terms of net interest margins.

HBL’s loan book is in good health – with an infection ratio of 7.5 percent, down from nearly 9 percent in CY17. In terms of income statement, high provision charges booked on account of investments and advances, took some sheen off. The contribution from non mark-up income also reduced substantially, mainly stemming from a massive reduction in income on sale of securities and a loss incurred on foreign exchange.

HBL has shown it is open to lend more as the interest rates have gone up. There may well be a slowdown in economic activities for a brief period, but with better energy availability to major industrial players, and many private players planning to expand operations, HBL is not too far away to pounce don new opportunities. The smart move of shifting the investment portfolio to treasury bills will also come handy in the future.

The bank’s loan book is growing, is clean, and is well provided for. The deposit base is massive and is growing in the right direction. Things are looking up for the biggest bank.