Corporate Results: Banking sector off to a good start

Allied Bank joins the pack chasing HSBC’s local assets.


Faseeh Mangi April 25, 2012

KARACHI:


The banking sector is off to a good start in 2012 as three of the country’s big five banks posted healthy profits in the first quarter of the year on Tuesday. Habib Bank and Allied Bank profits grew by 22% while MCB Bank followed with an increase of 12% during January to March 2012.


Board of directors of the three banks held separate meetings on Tuesday to discuss their first quarter performance with pressure on net interest income – core earnings of the industry – likely the stand out talking point. Two of the three bank’s net interest income – difference between the interest income generated by banks and the amount of interest paid to lenders – declined during the period under review.

Other than regular business, Allied Bank announced to join the race to buy HSBC’s Pakistan assets, making it the fifth interested party.

MCB Bank

MCB Bank’s net profit rose to Rs5.64 billion during January to March 2012 against Rs5.02 billion posted in the same quarter last year, according to unconsolidated results sent to the stock exchange.

The result is slightly higher than market expectation as analysts estimated the bottom-line, on average, to stand around Rs5.5 billion.

Net interest income was under pressure and declined 2% to Rs10.70 billion likely due to re-pricing of yields to account for a relatively lower interest rate environment. “The contraction in net interest income stems from lower net interest margins where growth in earning assets served to mitigate the impact,” said Global Securities analyst Syed Saquib Ali.

The bank with its result also announced the first interim dividend of Rs3.00 per ordinary share of Rs10.

Non-interest income rose an impressive 20% to Rs2.4 billion which likely included a one-off gain from divesting the Khushhali Bank stake. A consortium, led by United Bank Limited, was selected in February to acquire 67.4% stake in Khushhali Bank, the largest microfinance bank in Pakistan.

HBL

Habib Bank posted stellar earnings growth to Rs6.09 billion in the quarter ended March 31 from last year’s Rs5.00 billion, according to its consolidated results.

The bank was the only of the three to witness an upside in net interest income by 7% to Rs26.6 billion despite expected contraction in margins due to higher earning assets. The growth is likely on the back of balance sheet expansion, according to a Burj Research. Analysts are still estimating the core reasons as detailed account have yet to be released.

In another upside, the bank witnessed a sizeable decline of 55% in provisioning expense. Surprisingly, operating expenses have dropped sharply by 12% on a quarterly basis.

HBL did not declared any cash payouts alongside the result.

Allied Bank

Allied Bank posted consolidated net profit of Rs3.09 billion in the first quarter of 2012 against Rs2.53 billion on the back of higher non-markup income and lower provisioning.

The result was a surprise as analyst had forecast net profit to stand around the Rs2.79 billion mark.

The bank also announced its interest in conducting due diligence on HSBC Pakistan operations, potentially leading to an acquisition bid.

This took the number of interested parties to five with Habib Bank, Silkbank, MCB Bank and KASB Finance already named as potential buyers for the HSBC’s local assets estimated around Rs6.0 billion to Rs7.5 billion by AKD Securities.

Dividend income jumped five folds to Rs1.72 billion against Rs327 million in the same period last year.

The result also contained a negative surprise in the form of a sharp decline of 21% in net interest income to Rs4.87 billion. On a more positive note, the bank also announced a surprise interim dividend of Rs2.00 per share

Meanwhile, Habib Metropolitan also declared its quarterly statement with profits rising 17% to Rs1.21 billion on a yearly basis.

Published in The Express Tribune, April 25th, 2012.

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