KARACHI:
Habib Bank Limited (HBL), the largest private bank of the country, beat market estimates by posting a net profit of Rs4.7 billion in the first quarter of 2011, an increase of 30 per cent.
Growing interest income was the key feature in 2010 earnings for the sector and the same is expected this result season, said JS Global Capital analyst Mustafa Bilwani.
Net interest income rose 16 per cent to Rs22.1 billion during January to March 2011, up from Rs19.2 billion last year.
Continued borrowing by the government has increased secondary market yields by 135 to 140 basis points on a yearly basis. Higher yields added positively to the net interest, said the analyst.
Analysts’ forecast fell five per cent short of the net profit as they expected the bottom-line to be in the range of Rs4.4 to Rs4.5 billion.
Non-performing loans rise
Although the bank witnessed new loan accumulation of Rs4.4 billion, it remains in a better position as far as the industry is concerned. Gross non-performing loan ratio at 9.9 per cent was much better than the industry average of 14.3 per cent.
Of the new accretion, the textile segment – a major focus area in HBL’s portfolio – contributed a massive Rs3.3 billion. This would not be a worry in the near future as majority of the sector is doing well on the back of better fundamentals, said Bilwani.
Provisions against NPLs rose 65 per cent to Rs2.29 billion in the first quarter of 2011 against Rs1.39 billion posted in the same period a year ago.
Outlook
Increasing government borrowing will keep net interest margins steady in the upcoming quarters. However, restructuring and reversal of non-performing loans remain a key determinant for the profitability.
Published in The Express Tribune, April 16th, 2011.
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