Bank Al Habib Limited (BAHL) posted a strong 1HCY19 financial performance, registering 21 percent year-on-year increase in pretax profits. This is nothing short of remarkable considering the challenging environment the banking industry has faced for most part of 1HCY19. BAHL’s balance sheet growth has been steady and more importantly prudent, which ha helped the bank reap good results even in relatively tougher times.

The advances portfolio witnessed an increase of 5 percent over December 2018, strengthening the ADR to 57 percent – much higher as compared to peers. BAHL has never been a shy lender unlike some of the similar sized banks, as it positions itself as the leader in the trade business. Advances crossed Rs500 billion as at June end 2019, whereas investments also continued to grow by 9 percent over December 2019.

With the interest rates considerably higher during 1HCY19, the asset yields were also higher, resulting in the mark-up earned increasing by a massive 65 percent year-on-year. On the liabilities front, the growth was steady, with the deposits base growing by a healthy 10 percent over December 2018 to Rs876 billion. BAHL outpaced the industry in terms of growth in domestic deposits.

Banks have usually been shy of lending to the private sector, but BAHL has on most occasions, been an exception. BAHL has had a clean loan book for quite some time, which continues to improve. The infection ratio stood at just 1.27 percent. The NPLs are more than adequately provided for.

In times when many other banks have had trouble keeping the non mark-up income growing – BAHL managed that quite well. The fee and commission income grew by a massive 29 percent year-on-year, whereas the foreign exchange income expanded by over 67 percent year-on-year, more than mitigating the impact of some loss on account of sale of securities.

The interest rates are believed to be nearing the peak and the second half of the year may well be about repositioning of the asset portfolio. The LSM growth was at multiyear low in FY19 and trade activities have also slowed down of late – but there should be improvement on both counts around the corner, as the stabilization measures go deep. BAHL seems well positioned to bank on the opportunities that may come its way.