Habib Metropolitan reports falling profits

Falling interest income, climbing expenses hurt bottom-line growth.

KARACHI:

Habib Metropolitan Bank – part of the famous House of Habib’s finance and banking division – reported a fall in profits in the first half of 2013 as income from core operations drops due to shrinking banking spreads.

According to a copy of the financial statement sent by the bank to the Karachi Stock Exchange, Habib Metropolitan Bank’s profits were recorded at Rs1.78 billion in the semi-annual period, clocking in 5.1% lower than Rs1.88 billion the bank made in the corresponding half of 2012. The earnings announcement was not accompanied by any payouts to the shareholders.

Income from interest – core income of any bank – witnessed a 7.5% drop to Rs4 billion as State Bank continued with its slashing interest rate policy, thereby eating up the banking sector’s margins. Moreover, imposition of the floor at 6% on saving and term deposits on monthly average balances amid falling interest income hurt profitability further.

However, the bank managed to contain the situation as provisioning expenses were recorded 26.7% lower as Habib Metropolitan made lesser advances towards bad loans, maybe because the bank prefers to invest in government securities – bonds and treasury bills – like the whole banking sector.

Habib Metropolitan Bank’s income from non-core operations, on the other hand, reflected decent performance. The bank managed to increase its non-interest income by 14% to Rs2.95 billion during the period against Rs2.68 billion in the corresponding half of 2012, mainly by trading securities in the Karachi Stock Exchange.

Expenses of the bank climbed 14% to Rs3.23 billion as the bank continues to expand operations.

Published in The Express Tribune, August 24^th 2013.

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