Habib Bank Limited (HBL) announced its 1QCY21 results today

Habib Bank Limited (HBL) announced its 1QCY21 results today reporting above expected earnings of PKR 8.3Bn (EPS: PKR5.7), ↑104/46% YoY/QoQ respectively. Along with the result, the bank announced an interim dividend of PKR 1.75/sh.

Key high-lights of the result are summarized below:

Net Interest Income (NII) shot up by a sizable 16% on a YoY basis, which we opine, emanated from the high yielding investments book of the bank that kept NIMs de-cline under check despite the low interest rate environment. On a QoQ basis, NII declined by 4%. Going forward, we expect NII shrinkage of the bank to be lesser than that of peers courtesy HBL’s longer duration of the investments portfolio.

Non funded income was the major swing factor in the quarterly result with the im-petus coming from robust fee income, recovery in forex income and hefty unreal-ized gains on the held for trading portfolio. Non-Interest Income of the bank posted a sizable increase of 42/26% YoY/QoQ to close at PKR 8.2Bn. We opine recovery in forex income to a certain extent be attributed to the strengthening PKR which re-sulted in gains on the open USD position. Fee income, which underwent a challeng-ing CY20 having declined by 8.1% YoY in the outgoing year showcased healthy re-covery in 1QCY21 to close at PKR 5.9Bn (↑25/9% YoY/QoQ respectively) which can be attributed to greater trade and consumer related business and higher transac-tion based banking.

Apart from the upwelling NFI, earnings accretion is credited to the well controlled admin expenses which declined by 7% YoY (↑1% QoQ). The decline is attributed to the closure of NY branch and hence the reduction in legal/regulatory compliance costs from that end as well as the successful completion of business transformation program.

Provisioning expenses for the quarter clocked in at PKR 1.9Bn having eased off from PKR 3.7Bn booked in the previous quarter, although we await published accounts for detailed breakups, we expect a major chunk of this cost to pertain to general provisioning.

We have a BUY call on the scrip with a Dec-21 TP of PKR 160/sh.

Courtesy – BMA Capital Management Ltd.

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