HBL suffers after hefty fines, declares profits down 77pc YoY

LAHORE: Habib Bank Limited (HBL) posted its consolidated net profit after tax of Rs7.83 billion, with earnings per share of (EPS) Rs5.34 in FY17, against Rs34.07 billion with an EPS of Rs23.23 in FY16, here on Monday.

In 2017, earnings were down 77 per cent YoY to Rs7.83 billion as the bank incurred a one-off fine to the tune of Rs24 billion ($225 million) against its New York operations during 3Q2017.

The result announced by HBL was below analysts’ projections of Rs5.70 EPS – which was already lower than street consensus – due to lower than expected fees and foreign exchange income, and higher than expected admin expenses.

Alongside the result, HBL announced a surprise dividend of Rs1.0 per share, to bring full-year payout to Rs8.0 per share.

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If the fine is excluded, HBL’s FY17 pre-tax profits are down 7 per cent YoY against 49 per cent, currently.

Meanwhile, HBL registered 7 per cent YoY increase in Net Interest Income (NII) to Rs21 billion in 4Q2017 and remained in line with market expectations, which is likely to be supported by the balance sheet that grew by 11 per cent YoY as of Sep 2017.

The bank continued to post provision reversals as it booked reversal of Rs1.2 billion during 4Q2017 against Rs404 million in the same period last year.

Non-markup income was shed by 26 per cent YoY to Rs6.6 billion in 4Q2017 which mainly led to lower profits during the quarter. This was on the back of lower fee, commission and brokerage income and share of loss from associated companies.

According to a Topline Securities report, fee, commission and brokerage income were recorded down by 21 per cent YoY. The share of loss from associates clocked in at Rs226 million in 4Q2017 against share of profit of Rs1 billion during the same period last year.

Capital gains during the quarter stood at Rs2.8 billion, up 52 per cent YoY, supporting non-interest income to a little extent. Meanwhile, non-interest expense of HBL also increased by 18 per cent YoY to Rs19 billion mainly on account of higher admin expense.

Capital Stake Director Research Maha Jafer Butt told Pakistan Today, “HBL reported the penalty in financials of Q3 and this did not come as a surprise for the stock. The share price has appreciated 3.24 per cent in the last 6 months and has gained 27 per cent in 3 months.”

She also added “HBL posted a rise of 3.41 per cent in the internet income of FY17 much lower than peers MCB 10 per cent and UBL 9 per cent. While both MCB and UBL announced flat non-interest income, however, HBL showed an extension of 16 per cent. Profits nosedived, as expected, but the bank still declared a final cash dividend.”

HBL’s share price decreased 1.36 per cent, or Rs2.75, to Rs199.03 with a volume of 0.66 million shares traded at the PSX here on Monday.

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Eleazar Bhatti
Eleazar Bhatti
The writer currently serves as the Content Manager at Profit by Pakistan Today and is an economics graduate from Leeds Business School in the UK. He can be reached at [email protected] or at twitter.com/eleazarbhatti.
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