HBL: Higher than expected NII drives earnings

October 16, 2020 (MLN): Habib Bank Limited (HBL) has witnessed a 2.86x (186.38%) increase in its net profits after tax during 9MCY20 to Rs. 25.27 billion as opposed to the profits of Rs 8.82 billion earned in the corresponding period of last year.

This reflected in HBL’s earnings per share which exhibited a whopping increase of 191.5% from Rs 5.89 per share to Rs 17.17 per share.

This extraordinary performance can be attributed to higher than expected Net Interest Income (NII), normalization of operating expenditure post winding-up of New York operations and the continuing strong performance from the core domestic franchise.

In addition to this, 15% YoY rise in dividend income from associates, income from derivatives (Rs 622.74 million) and gain on sales of securities (Rs 7.36 billion) further strengthened bank’s profitability. As in the same period last year, the bank booked a loss of Rs 657.5 million from derivatives and Rs 2.4 billion on sales of securities.

During the period, bank’s total income increased by a 36.7% YoY to Rs. 122.85 billion led by 33.39% (Rs 24.72 billion) YoY growth in net interest income to Rs 98.78 billion. The increase in net interest income was mainly due to negligible growth in interest expense by 0.5% YoY compared to a 13.85% YoY increase in interest earned.

Moreover, the increase in bank’s non-interest income by 52.5% to Rs 24 billion further supported bank’s earnings.

The provisioning expenses for the bank clocked in at Rs 8.5 billion during 9MCY20 which is 4.7x higher compared to last year. To recall the management has stated that it finds it appropriate to record upto 1% general provision on the domestic portfolio excluding govt. guaranteed exposure, consumer/staff lending and cash secured exposure, a report by Arif Habib Limited cited.

Following NY costs elimination, the bank’s operating expenses witnessed a decline of 1.9% YoY to Rs 70.28 billion.

This has caused bank’s cost to income ratio to decline to 58% from 78% during 9MCY19.

On the tax front, the bank has witnessed 86% YoY surge in tax related expenses. The effective rate during the period stood at 41% compared to 52% last year.

Moreover, as per SBP directives for capital conservation, the bank did not announce any cash dividend.

Consolidated Profit and Loss Account for the Nine months ended September 30, 2020 (Rupees '000)

 

Sep-20

Sep-19

% Change

Mark-up/return/profit/interest earned

                  207,931,102

                  182,631,441

13.85%

Mark-up/return/profit/interest expensed

                  109,146,648

                  108,573,082

0.53%

Net mark-up/return/profit/interest income

                     98,784,454

                     74,058,359

33.39%

Non mark-up/interest income

 

 

 

Fee, commission and brokerage income

                     13,383,475

                     15,456,596

-13.41%

Dividend income

                           287,643

                           367,646

-21.76%

Share of profits of associates and joint venture

                       2,546,333

                       2,212,652

15.08%

Foreign Exchange Income/(loss)

                        (333,426)

                           302,575

 

Income/(loss) from derivatives

                           622,743

                        (657,532)

Gain/ (loss) on sale of securities – net

                       7,362,042

                     (2,411,531)

Other income

                           198,466

                           506,627

-60.83%

Total non-mark-up /interest income

                     24,067,276

                     15,777,033

52.55%

Total income

                  122,851,730

                     89,835,392

36.75%

Non mark-up/interest expenses

 

 

 

Operating expenses

                     70,284,509

                     68,969,691

1.91%

Workers' Welfare Fund

                           856,682

                           393,094

117.93%

Other charges

                           292,448

                           404,057

-27.62%

Total non-mark-up/interest expenses

                     71,433,639

                     69,766,842

2.39%

Profit before provisions and taxation

                     51,418,091

                     20,068,550

156.21%

Provisions and write offs-net

                       8,514,690

                       1,783,344

377.46%

Profit before taxation

                     42,903,401

                     18,285,206

134.63%

Taxation

                     17,631,334

                       9,460,517

86.37%

Profit after taxation

                     25,272,067

                       8,824,689

186.38%

Earnings per share – basic and diluted (Rupees)

                               17.17

                                  5.89

191.51%

 

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Posted on: 2020-10-16T14:33:00+05:00

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