Inside Financial Markets

Habib Bank Limited (HBL) shows Impressive Bottom Line Growth

WE Financial Services Limited.

In our today’s morning briefing we would discuss the performance of Habib Bank Limited (HBL) in 1HCY15 and would give recommendation to the investors.

Bottom-line grows 25% YoY

On back of higher interest income and hefty rise in non-interest income, the cumulative profit after taxation (PAT) of HBL grew by 24.9% YoY in 1HCY15 to Rs16,914 million (EPS: Rs11.53) versus a PAT of Rs13,542 million (EPS: Rs9.23) in 1HCY14.

The profitability of the bank however was affected by provisions and significant hike in taxation owing to imposition of one-time 4% Super tax by the government in the recent budget. On QoQ basis, the bottom-line declined by 20.8% to Rs7,474 million (EPS: Rs5.1) in 2QCY15 versus Rs9,440 million (EPS: Rs6.44) in 1QCY15 owing to lower interest income, higher effective taxation, and surge in provisions.

However, rise in non-interest income did provided some support to the bottom-line. The corporate results were accompanied with second interim cash dividend of Rs3.5/share taking the total cash dividend so far this year to Rs7/share.

NII elevates around 23% YoY

The interest income of the bank grew by 11.4% YoY in 1HCY15 to Rs72,491 million as against Rs65,087 million in 1HCY14 owing to increased investments in Treasury bills and other investment instruments.

On the other side, interest expense witnessed a minor surge of 0.8% YoY to Rs34,184 million during the period under review as compared Rs33,901 million in 1HCY14.

Therefore the net interest income (NII) of the bank reached Rs38,307 million in 1HCY15 resulting in a 22.8% YoY growth when compared to a NII of Rs31,185 million in the identical period in CY14.

Impressive hike in non-interest income

The non-interest income of the bank reached Rs15,972 million in 1HCY15 which is 76.3% YoY more when compared to a non-interest income of Rs9,058 million in 1HCY14.

This rise in non-interest income is mainly attributed to increased income from; sell of securities, fees and commission, and dividend.

The bottom-line growth of the bank was affected by provisions of Rs1,701 million in 1HCY15 versus reversal in provisions of Rs169 million in the similar period in CY14.

Investments, deposits, and advances rise

The investments of the bank reached Rs1,126,688 million at June 30, 2015 which is 25.5% more as against investments of Rs897,574 million at December 31, 2014.

After continuous decline in interest rates, the bank has switched its investments from PIBs to T-bills and other investment instruments.

The deposits of the bank too are growing as it reached Rs1,525,066 million at June 30, 2015 which is 5.4% up from Rs1,447,215 million at December 31, 2014. The CASA ratio of the bank reached 82.7% at June 30, 2015.

The advances of the bank witnessed a minor hike of 1.3% to Rs562,853 million at June 30, 2015 versus Rs555,394 million at December 31, 2014.


The scrip is currently trading at Rs211.94/share offering an upside potential of 11% to our June’16 target price of Rs235/share. Therefore we recommend’BUY’ forthe scrip.

Baqar Hussain

A Wannabe CFO, just had stepped in the corporate sector, willing to explore every aspect here and learn as mush as i can, awareness for those who dont, get the info where ever possible and stay up to date always.

The Canadian Securities Institute


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Inside Financial Markets was a joint publication of Pakistan Stock Exchange (PSX)and Society of Technical Analysts Pakistan (STAP)