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HBL posts consolidated profit in first nine months

HBL has delivered a consolidated profit after tax of Rs25.8 billion for the first nine months of 2016, slightly higher than the Rs25.7 billion achieved for the same period in 2015. Earnings per share (EPS) for the first nine months of 2016 were Rs17.47 as against to Rs17.53 in the comparable period of 2015. Pre-tax profit for the first three quarters of 2016 is Rs43.5 billion, 8.0 percent lower than for the corresponding period of 2015.

The 2015 results included exceptional capital gains, chiefly because of re-profiling of the PIB portfolio, which were not predicted to be repeated. Excluding the impact of capital gains, pre-tax profit is 10 percent higher than for first nine months of 2015, while profit after tax is 25 percent greater than for the same period.

HBL’s balance sheet has grown by 7.0 percent over December 2015 to reach Rs2.4 trillion. Total deposits rose by 5 percent and the domestic deposit mix continued to enhance, as the ratio of current accounts increased from 34.4 percent in December 2015 to 35.6 percent in September 2016, and CASA enhanced from 85.6 percent to 89.0 percent over the corresponding period.

Average domestic current accounts for the first nine months of 2016 rose by 19 percent over the corresponding period of 2015, enabling HBL to decline its cost of domestic deposits. Average domestic loans increased by 9.0 percent with all business segments registering increases. With average PIB volumes also growing, the fall in asset yields was restricted, enabling the Bank to contain the compression in its net interest margin despite a significantly lower policy rate environment.

With a 15 percent growth in the average balance sheet, net interest income for the nine months closed September 30, 2016 increased by 7 percent to Rs62.2 billion. Non mark-up income, excluding capital gains, rose by 8 percent compared to the first nine months of 2015. Fees and Commissions continued their growth trajectory, rising by 18 percent to Rs13.7 billion.

The Bank’s administrative expenses increased by 10 percent as against to the first nine months of 2015, despite the full impact of rise in the branch network and certain one-off costs, with the cost/income ratio at 46.0 percent.

Consequently, overall provisions declined by 58 percent as against to the first nine months of 2015. The coverage ratio enhanced by 80 bps over the previous quarter to return to 90 percent as at September 30, 2016.

In Pakistan, presently banking sector’s experts have revealed that despite seasonal attempts and a shift in the government’s borrowing pattern, the banking sector remained sound and stable with steady performance during the third quarter (July-Sept) of this calendar year (FY2016).

The stability and resilience of the banking system remains at a comfortable level, on aggregate basis and the solvency profile of the banking sector has more strengthened during Q3FY2016 as Capital Adequacy Ratio (CAR) has enhanced to 16.8 percent as of end-September, 2016 from 16.1 percent as of end-June, 2016, well above the local minimum requirement of 10.25 percent and foreign benchmark of 8.625 percent.

The Year-to-Date (YTD) profitability after tax of the banking sector has narrowed by 6 percent because of lower interest margins and lower non-markup income and profit after tax has reached Rs139 billion for the first nine months of FY2016 as against to Rs148 billion in the corresponding period of FY2015.

Return on assets has fallen to 2.1 percent as against to 2.2 percent in Q2 FY2016 and 2.6 percent in Q3FY2015. The asset quality of the sector has slightly deteriorated as against with the last quarter and assets of the banking sector declined by 1.6 percent to Rs15.134 trillion during Q3 FY2016 as against to 2.1 percent increase during Q3FY2015.

On the funding side, borrowings from financial institutions, mostly from SBP, has seen 12.7 percent fall while deposits have observed a nominal growth of 0.6 percent.

It is marked with decline in gross advances by 2.3 percent to Rs5.052 trillion on account of net retirement by private sector and commodity operation financing. During the period under review, investments have declined by 2.5 percent Rs7.625 trillion because of shifting of government’s borrowing from commercial banks to central bank.

On the funding side, deposits have inched up by 0.6 percent to Rs11.092 trillion during Q3FY2016 as against to the last quarter mainly because of lower decline in current deposits and higher growth in saving and fixed deposits, which is in contrast to seasonal fall of deposits usually seen in the third quarter. During the reviewed quarter, Non-Performing Loans (NPLs) have observed marginal decline, though, NPLs to gross advances ratio has slightly increased.

The ratio has inched up by 20 bps to 11.3 percent as of September 30, 2016 but entirely on account of fall in seasonal financing activity. The coverage ratio, provisions to NPLs, has, on the other hand, enhanced by 30 bps to reach 82.7 percent as of September 30, 2016.

The SMEs finance has picked up by 9.2 percent during the reviewed quarter which is in sharp contrast to seasonal decline in third quarter. The rise has been broad based working capital, fixed investment and trade finance. Banks’ holding of government securities has declined by 3.2 percent during Q3FY2016 to reach Rs 7.0 trillion.

The investments to deposits ratio (IDR) reached at 69.2 percent as of end September, 2016 as against with the end June 2016 level of 71.4 percent. The fall in IDR reflects a QoQ drop of 3.2 percent in investments in government securities and a slight uptick in deposits. At the same time, the seasonal fall in advances also brought the already low Advances to Deposit Ratio (ADR) down to 46 percent in Q3FY2016 from 47 percent in Q2FY2016.

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