LAHORE/KARACHI: Habib Bank Limited (HBL) Friday announced a massive after-tax profit of Rs15.1 billion for the half-year ended June 30, 2020, up 286 per cent from the same period last year, on the back of a surge in interest and non-interest based incomes and higher than expected capital gains.
For the quarter, the bank realised an after-tax profit of Rs11.08 billion, compared to Rs749 million for Q2 last year. The bank reported Earnings per share (EPS) at Rs10.32 for the half-year against an EPS of Rs2.53 for the same period last year, depicting a staggering Year-on-Year (YoY) surge of 309 per cent.
The EPS for the quarter was announced at Rs7.53 against Rs0.44 for the same period last year. No dividend was announced as per the State Bank of Pakistan’s (SBP) directives for capital conservation.
“HBL’s results for the second quarter of 2020 were higher than expectations. Better interest income, non-interest income and higher than expected gain on securities led the bank to announce stellar earnings for the outgoing quarter,” said BMA Capital Executive Director Saad Hashmi.
The net interest income (NII) of the bank settled at Rs63.1 billion for first half of 2020, rising 32 per cent YoY while posting a drastic jump of 25 per cent QoQ.
“The sharp growth in NII was witnessed due to early repricing of deposits,” KASB Securities said in its report.
The non-interest income of the bank also surged 88 per cent QoQ to Rs10.8 billion. Within the non-interest income, fee income declined 22 per cent YoY and 12 per cent QoQ to Rs4.2 due to economic slowdown, closure of branches and waiver fees on digital transactions.
The Net Financial Income (NFI) of the bank posted a massive surge of 109 per cent YoY during half-year 2020 primarily owing to capital gains of Rs6.7 billion against losses of Rs2.1 billion in the same period last year. The bank booked 94 per cent higher QoQ capital gains which are most likely being booked on its bond portfolio following aggressive rate cuts, read a report by Arif Habib Limited, a securities brokerage firm.
“Capital gains and normalisation in administration costs, which was widely expected post US windup, helped the bank to post phenomenal results. It overshadowed the jump in provisioning costs which is a bit concerning and needs to be watched going forward,” said Hamza Kamal, equity analyst at securities brokerage firm AKD Securities.
“HBL earnings were higher against street consensus due to capital gains realised during Q2.”
However, the bank reported improved net interest margins of Rs59 billion as against last year given increase in asset base,” said Standard Capital CEO Naushad Chamdia.
“Significantly, the bank also reported higher admin cost and tax incidence wherein investors kept a watch,” he added.
Provisioning expenses for the bank clocked in at Rs4.8 billion, 674 per cent higher QoQ, which was mostly offset by Rs4.4 billion capital gain booked during the quarter. Operational expenses witnessed a breather, declining 14 per cent QoQ following the closure of the New York branch of the bank and completion of the domestic business transformation programme.
“The bank’s income from FX operations also provided a major sigh of relief with total income from FX derivatives clocking in at Rs990 million during the second quarter of 2020, against a loss of Rs1.5 billion last quarter,” said AHL in its report.
Darson Securities Head of Research Yousaf Saeed said that earnings of the bank would be affected once the repricing effect comes into play from the third quarter of 2020.
“We expect NII to decline and new income margins to shrink as advances reprice going forward due to a 400bps cut in the policy rate to 7 per cent during the quarter,” KASB said in its report.