Habib Bank shares may gain over 80%: Report

November 21, 2024 (MLN): Habib Bank Ltd. (PSX: HBL) shares are expected to surge by over 80% as its deposit mobilization efforts are seen continuing at a similar pace relative to the last five years, according to brokerage house KTrade.

“We expect HBL’s deposit mobilization efforts to continue at a similar pace relative to the last five years as well as tailored lending programs that should support loan growth outlook for the bank relative to banking sector peers,” KTrade commented in a report, while giving overweight stance to Pakistan banks.

The monetary easing cycle is underway since June 2024 with a cumulative 700 basis points in policy rate. An additional rate cut before year-end due to disinflation should bring the policy rate below 14%, it noted.

Select banks litigation against implementation of Advance-to-Deposit Ratio (ADR) tax in fiscal year 2025 budget can provide near-term relief to earnings outlook. However, KTrade stated that it is a key risk going forward as income on investments is 4.8 times in 2024 of the KTrade Banking Universe relative to its previous imposition in 2021.

Near-term measures in the form of shedding deposits, cost rationalization, and leveraging non-fund income channels are likely to be undertaken to soften the impact of potential punitive taxation, it added.

However, as the economy recovers, KTrade said the next leg in the banking sector rally will be intermediation led.

"We believe banks with developed and focused lending interventions can outperform peers," it added.

KTrade's top picks across the coverage cluster include Habib Bank Ltd., United Bank Ltd., and Bank Alfalah Ltd. across conventional banks and Faysal Bank Ltd. within the Islamic banking space.

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