HBL posts net profit of Rs 11bn, Rs 7.53/share in last quarter

KARACHI: The Habib Bank Limited (HBL) reported a net profit of Rs 11 billion or Rs 7.53 per share for the quarter ending June 2020, which is 13.8 times of Rs 750 million or Rs 0.44 per share it earned in the same quarter of the previous year, the company’s financial results revealed Friday.

The largest bank of the country saw its net interest income (NII) increase by 44% to Rs 35 billion between April and June 2020, compared to Rs 24 billion for the same quarter of the previous year.

The NII is a financial performance indicator that reflects the difference between the income a bank earns from lending and the interest it pays to depositors. Analysts say the result is higher than the market expectations.

“This is still a very strong result, beating our projected earnings per share (EPS) of Rs4.9 by some distance,” the Intermarket Securities said.

The higher-than-expected results can be attributed to the growth in NII, reduced operating expenses, cut in interest rates and significant capital gain.

The growth in NII is a result of a drop in interest expenses by 21%. This can be attributed to the cut in interest rates by the State Bank of Pakistan leading to an immediate re-pricing of deposits. This means that the bank had to pay less interest (profit on savings) to people who deposited their money for a fixed return, compared to the past when interest rates were around 13%.

“This (earnings) is attributable to significant growth in total income and curtailing operating cost,” the Taurus Securities Limited said.

Operating expenses decreased by 6% to Rs22 billion compared to the same quarter of previous year. These reduced expenses can be attributed to lower branch operations due to the coronavirus lockdown that helped reduce costs.

Furthermore, HBL booked Rs4.4 billion in capital gains for the quarter, contributing Rs3 per share to pre-tax earnings. Capital gain refers to profit resulting from the sale of a capital asset, such as stock.

However, the bank had a total provisioning expense of Rs4.8 billion which is higher than the market expectations, given the SBP’s one-year relaxation to borrowers. “In the absence of detailed accounts, we think this could potentially be due to subjective classification of weak accounts,” an IMS report says. “If this is the case, it improves the earnings outlook for CY21, in our view.”

Following the result announcement, the HBL share price appreciated by 5.5% to Rs116 from the previous day’s tally of Rs110. HBL stock outperformed Friday because the share price increased as opposed to an increase in KSE 100 index by only 0.08%.

HBL is incorporated in Pakistan and engaged in commercial banking-related services both in the country and overseas. The Aga Khan Fund for Economic Development (AKFED), SA is the parent company of the bank.