Banking experts of Pakistan recorded that in the statement of monetary policy which was released during July 2018, the State Bank of Pakistan (SBP) increased the policy rate by 100 bps to 7.5 percent, the first rise of this magnitude since 2008. The reversal of the interest rate cycle is now in full swing with three hikes during 2018. The SBP cited pressure on the external account and highlighted risks to macroeconomic stability from the substantial fiscal deficit, higher oil imports and growing inflationary pressures. They have also recorded that the private sector credit offtake also grew by over Rs 800 billion during FY2018, a significant improvement over the Rs 697 billion growth in FY2017.
In the country, banking sector advances have grown by 14 percent over December 2017, while deposits grew by 6 percent. Average banking spreads compressed by 17 bps as against to the corresponding period previous year as the rate rises during the first half of the year will only have a lagged effect on asset yields.
In Pakistan Habib Bank Limited (HBL) is the largest bank and has been offering the innovative services to their target customers. The management of HBL also mentioned that over the years, HBL has grown its branch network and maintained its position as the largest private sector bank with over 1,700 branches and 2,000 ATMs globally and a customer base exceeding ten million relationships.
In the financial statement of HBL released by the financial experts during half year ended June 30, 2018, it is mentioned that the bank’s domestic business continued its growth momentum, with deposits growing by 8 percent over December 2017 to nearly Rs 1.9 trillion, and market share growing to 14.4 percent. In this period, the Bank added Rs 119 billion in domestic CASA deposits, further enhancing the CASA ratio to 86.6 percent as at June 30, 2018. The growth momentum in current deposits delivered a 9.8 percent growth in just six months. Current accounts stood nearly Rs 690 billion and their share in the deposit mix enhanced by 70 bps to 36.3 percent during June 2018. With a renewed focus on quality lending growth, HBL’s domestic loan book grew by 13 percent over December 2017 with corporate loans, Islamic financing and consumer lending making key contributions.
HBL’s posted financial performance remains impacted by the revision in pension costs, the impact of the multiple currency devaluations on overseas borrowings and the remediation, legal and regulatory costs related to the Bank’s New York branch. In addition, the accelerated shrinkage in the global balance sheet has resulted in significantly declined revenues and while the cost profile has enhanced, further reductions will be gradual. As a result, HBL’s profit before tax (PBT) for the first six months of 2018 is Rs 14.1 billion. Profit after tax (PAT) for the same period is Rs 8.1 billion, with earnings per share (EPS) for H118 at Rs 5.42.
The financial experts of HBL also recorded that the average domestic loans for H1-2018 increased by 28 percent over H1-2017, with all businesses recording significant rises, and average domestic current accounts for the first six months of 2018 grew by 15 percent over H1-2017. This improvement in the balance sheet composition more than alleviated the lower spread which reduced by 30 bps YoY (year on year), as a result of lower investment yields. Domestic net interest income for H1-2018 is thus one percent higher than for the first six months of 2017. However, with international revenues under pressure, HBL’s total net interest income reduced by 3 percent YoY to Rs 40.3 billion.
With a global presence in over 25 countries spanning across four continents, HBL is also the largest domestic multinational. The Bank is expanding its presence in principal foreign markets counting the UK, UAE, South and Central Asia, Africa and the Far East. The key areas of operations encompass product offerings and services in Retail and Consumer Banking. HBL also has the largest Corporate Banking portfolio in Pakistan with an active Investment Banking arm. SME and agriculture lending programs and banking services are offered in urban and rural centers. The management also posted in the financial statement that the Core FX income enhanced by 10 percent as trading revenues delivered a strong performance. Domestic fee income increased by 8 percent over H1-2017, excluding the impact of the predicted drop in revenue from home remittances, as volumes have declined by over 70 percent. Account operations, consumer finance and card related fees were key contributors to the growth in fees and commissions. The strong core domestic performance was impacted by Rs 1.0 billion reduction in fees and commissions from the global business and by the drop in the Rupee which resulted in a loss of Rs 2.5 billion on revaluation of overseas borrowings. Total non-mark-up income is therefore posted at Rs 10.7 billion, Rs 5.7 billion lower than in H1-2017. The Bank has embarked on a worldwide business and compliance transformation project through which it intends to increase its operations and customer service to world-class levels. HBL will continue to invest in this area, in state of the art technology, and in building on its market leading brand presence. Excluding the impact of pensions, and the ongoing costs of New York and business transformation, the growth in administrative expenses was contained at single digits. A positive recovery stream has led to Rs 2.7 billion reduction in domestic non-performing loans (NPLs), while overseas NPLs have grew as a result of the currency devaluation. Consequently, loan provisions have posted a reversal of Rs 240 million, compared to a provision of Rs 564 million in H1-2017. With stable NPLs, the coverage ratio strengthened to 91.7 percent and the infection ratio, down to 7.6 percent, is at its lowest level since the privatization of the Bank.
|Financial performance of HBL (Rs. Mn)|
|Advances (net of provision)||382,173||456,356||454,662||459,750||457,368||499,818||563,701||600,020||637,384||748,466|
|Investments (net of provision)||175,197||129,833||216,468||254,909||418,604||797,095||826,062||922,691||1,270,824||1,344,405|
|Profit before taxation||13,670||16,932||21,382||27,040||34,056||35,562||36,133||48,250||60,286||56,525|
|Profit after taxation||9,921||10,864||13,401||17,034||22,161||22,792||23,027||31,483||35,102||34,206|