Corporate results: Bank AlHabib’s profits dip amid low-interest rate environment

Bank pockets Rs2.43b in first half of 2013 as non-core income supports bottom-line.

KARACHI:

Bank AlHabib – run by the Dawood Habib group of companies – witnessed a marginal drop of 3% in its profits as shrinking banking spreads hurt the whole banking sector’s profitability.

According to notice sent to the Karachi Stock Exchange, the bank earned Rs2.43 billion in the first half of 2013, compared to Rs2.51 billion it made in the corresponding half of 2012. No payout to shareholders was announced by the bank’s board of directors.

Presently, the bank has a network of 401 branches and three offshore banking units in Bahrain, Turkey and export processing zone. One more milestone achieved by the bank is that 100% of its branches are online.

Income from interest – core income of any bank – declined 7.29% to Rs7.01 billion in the period under review as the State Bank of Pakistan continues to slash interest rates amid falling inflation – one of the ways the central bank is trying to force the banking sector to lend to the private sector.

Bank AlHabib managed to cut down its provisions as total provisioning expense witnessed a decline of 33% during the semi-annual period. This allowed the bank to contain the falling core-income, where it managed to report a fall of 6% in net interest income earned by the bank to Rs6.757 billion.

Instead of boosting core income, Bank AlHabib shifted its strategy focus towards non-core income as growth of 22% in non-interest income supported bottom-line growth. Amid booming Karachi stock market, income from trading equity has contributed much to the banking sector’s earnings, and Bank AlHabib in no different as the bank made Rs372 million just from capital gains by trading in equities.

Published in The Express Tribune, August 30^th, 2013.

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