HBL profits surge 11% to Rs17.4 billion

Earnings growth attributed to increase in core operations, lower provision expense.

KARACHI: Habib Bank Limited (HBL), the country’s largest bank network-wise, saw its profit grow 11% to Rs17.4 billion in the first nine months of 2012 on the back of growth in interest income and lower provision expense.

“The growth in earnings mainly came from higher interest income and lower provision expense,” said Summit Capital analyst Muhammad Farhan Malik.

Core earnings of the bank, the net interest income, grew 18% to Rs84.6 billion on the back of higher earning assets.

Increase in non-interest income to Rs11.5 billion also supported the bottom-line of the bank. Resultantly, total income of HBL hit Rs96 billion in the period under review.

Provisioning expense was cut down 35% to Rs3.6 billion from Rs5.6 billion, reflective in the bank’s earnings. The result was in line with market expectation as analysts expected net profit to stand, on average, at Rs17.3 billion.

During the period, HBL became the first bank to cross the Rs1-trillion mark in deposits, a remarkable feat. On the other hand, interest expense jumped 34% attributable to higher costs of deposits.

Profits could have been higher had effective taxation not been 38% during the period under review however, the bank could surprise the market in the next quarter if the expected normalisation of tax rate is implemented.

On a quarterly basis, HBL posted a profit of Rs5.5 billion, down 3% from Rs5.7 billion in July to September 2011. Lower earnings were primarily attributed to lower banking spreads and cut in interest rates by the State Bank of Pakistan during the quarter, says an AKD Capital research note.

Published in The Express Tribune, November 1^st, 2012.