Yesterday was about results. There was one announced by Pakistan’s largest commercial bank HBL too. And it went all well within expectations. The result was accompanied by an interim cash dividend of Rs3.5/share. The top line and bottom-line largely remained flattish. The first quarter was largely uneventful, but the balance sheet kept growing to mammoth levels.

Low spreads and low interest rates were always going to mean a depressed top line, despite a slight surge in earning assets. The asset mix saw no drastic change, as investments continued to outpace advances. The IDR now stands over 74 percent, whereas the ADR barely sits a shade over 40 percent. Banks, it seems, have not yet felt the necessity to go all out on a lending spree. And it makes all business sense too, as the profits still seem sizeable, primarily coming from government treasuries and non-funded income.

HBL’s balance sheet has both grown and improved of late and now exceeds a mammoth Rs2.5 trillion. The deposit base had extended in double digits last year. Just one percent increase in the deposit base over December 2016 seems understandable. Recall that HBL boasts of a massive deposit base, fast approaching Rs2 trillion. What is more important is the fact that the deposit mix is continuously improving, as current and saving accounts now form the bulk of total deposit. The improved CASA ratio has meant reduced cost of deposits, which becomes more important in times of thin spreads.

HBL’s non-core income continues to ably support the bottom-line, as a sizeable growth was witnessed in gain on sale of securities. HBL has traditionally kept a check on administrative expenses, and has had a cost income ratio to be envious of. But the administrative expenses of late have appeared on the higher side.

Recall that HBL’s infection ratio had slipped to single digits for the first time in eight years. The trend continues, which speaks volume of the ever improving asset quality and prudence. HBL faces no immediate need to alter its current strategy towards the asset mix. With economic indicators slowly but surely improving, advances should certainly head north sooner than later. That said, HBL can do just as well, without it too.

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HABIB BANK LIMITED (CONSOLIDATED P&L)


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Rs (mn)                              1QCY17    1QCY16    chg


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Markup earned                        34,932    35,178    -1%


Markup expenses                      14,806    14,994    -1%


Net Markup income                    20,126    20,184     0%


Provisioning/(Reversal)                 322       468   -31%


Net Markup Income after provisions   19,805    19,716     0%


Non Mark-up/Interest Income           8,313     6,600    26%


Operating revenues                   28,118    26,316     7%


Non Mark-up/Interest expenses        14,065    12,462    13%


Profit before taxation               14,053    13,853     1%


Taxation                              4,973     4,819     3%


Profit after taxation                 9,080     9,035     1%


EPS (Rs)                               6.16      6.15


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