Arif Habib Limited hosted HBL’s analyst briefing session today, during which the HBL management delved into the 1QCY24 results and offered valuable insights into the bank’s forthcoming strategy. Here are the key highlights from the session.

Brief Takeaways

To recall, HBL announced earnings (PAT) for 1QCY24 at PKR 15.2bn (EPS: PKR 10.37), depicting an increase of 15% YoY | 2% QoQ (4QCY23 EPS: PKR 9.00). A QoQ decline in provisioning fueled the bank’s earnings. On a YoY basis, higher markup and non-markup income led to an increase in overall profitability. As a result, HBL announced a cash dividend of PKR 4.0/share.

As of March ’24, the bank’s total deposits reached PKR 4.4trn, marking a 5.6% increase compared to December ’23 and securing a market share of 13%. The growth in domestic deposits was primarily driven by low-cost deposits, with PKR 73bn in Current accounts and PKR 310bn in low-cost savings accounts playing a significant role.

By the end of Mar’24, the investment portfolio retained its high liquidity, with a significant portion allocated to T-bills and floating rate PIBs, comprising 70% of the investment book. Specifically, PKR 424bn were invested in T-bills, accounting for 17% of the total investment book, while PKR 494bn were allocated to Fixed-rate PIBs, representing 19% of the total investment book. Moreover, a substantial PKR 1.06trn was invested in Floating Rate PIBs, constituting 41% of the total investment book.

The bank’s ADR as of March ’24 declined to 40%, compared to 44.9% in December ’23, mainly due to a slowdown in credit demand.

In 1QCY24, HBL achieved a fee income of PKR 11.9bn, reflecting a robust 27% YoY increase. The bank anticipates this income to sustainably grow at 20% over the next 2-3 years.

The bank targets a domestic cost-to-income ratio of around 40% while simultaneously aiming to reduce the total Cost-to-Income Ratio to 50%.

In the short term, HBL targets an ROE of 17% to 19% alongside an ROA specific to domestic operations of 1.1% to 1.2%.

The bank’s loan portfolio consists of 80% floating-rate loans and 20% fixed-rate loans.

As of March ’24, the bank’s infection rate stood at 5.6%, compared to 5.2% in December ’23. Additionally, the coverage ratio stood at 83.8%, a slight increase from 83.3% in December ’23.

HBL foresees a potential reduction in the policy rate by the SBP in the forthcoming (Apr’24) monetary policy. Additionally, the bank anticipates the policy rate to decrease to ~17.5-18% by the conclusion of CY24.

Courtesy – AHL Research