Higher taxes dent HBL’s profitability, down by 33% YoY in 1HCY22

July 29, 222 (MLN): Habib Bank Limited (PSX: HBL) disclosed its financial statement on Thursday for the period ended on June 30, 2022, as per which the bottom line of the bank shrank by around 33% YoY to stand at Rs12.1 billion [EPS: Rs8.1] compared to Rs18.02bn in1HCY21 [EPS: Rs12.04].

The drop in profits is mainly due to the significant jump in taxation during 1HCY22 which clocked in at Rs22.48bn, up by 71% YoY. The major blow came from the effective tax rate of 82.5% QoQ recorded in the outgoing quarter due to the imposition of super tax and poverty alleviation tax announced in the federal budget.

Along with the results, the bank declared a cash dividend for the second quarter ended on June 30, 2022, at Rs1.50 per share i.e. 15%. This is an addition to the interim cash dividend already paid at Rs2.25 per share i.e. 22.5%.

The net interest income of the Bank increased by 14% YoY to Rs73.9bn in 1HCY22, on the back of robust book growth, favorable asset pricing, and extremely agree leverage of book.

Meanwhile, the non-funded income witnessed a growth of 34%YoY to Rs23.7bn in the backdrop of a 28%YoY surge in fee and commission income, while, FX income also posted a jump of 5.3x YoY during 1HCY22 to Rs7.8bn.

On the other hand, the derivative trading desk reported a loss of Rs1.1bn which capped further growth in NFI. The disappointing performance of the derivatives desk during the quarter was the key reason for the loss, a report by AKD Securities noted.

On the expenses front, the admin expenses reportedly jumped by 26.5%YoY during the period under review due to rising inflation in the country which took the cost-to-income ratio to 64%.

Furthermore, the provisioning expenses clocked in at Rs1.6bn, which took the total provisioning expenses during 1HCY22 to Rs2.8bn.

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