Pakistan’s leading commercial bank, Habib Bank Limited (HBL) announced its 2020 financial results, where the bank reported below the expected net profit of PKR 30.9 billion compared to PKR15.5bn last year. The earnings per share of the bank increased to PKR 21.06 compared to PKR 10.45 for 2019. Bank also announced below expected dividend of PKR 4.25/share.

The cost-to-income ratio of the bank during CY20 declined to 59% as bank took cost cutting measures.

Lower non-markup income in last quarter and higher provisioning expense also dented the profit of the bank.

Net Interest Income during CY20 increased by 28% YoY to PKR 130 billion, the highest ever leve for the bank.

Worrisome fact for the bank is that Non-Funded income barring capital gains declined during the year. If the bank hadn’t booked Capital Gains of PKR 7 billion, the non-interest income would have been lower than the last year. This came in contrast to the banking sector average growth in non-interest income during the year.

Provisioning expense of the bank increased by massive 269% to PKR 12 billion. Initial assessment suggest that bank has subjectively pre-booked the Bad loans to net off from increased profit of the year. However, the quantum of Provisioning suggest that the bank may also have elevated Provisioning expense for another year or two.

Rupees in Million20202019YoY
Interest Earned271,237258,1145%
Interest Expensed141,133156,790-10%
Non-Interest Income130,104101,32428%
Non-Funded Income30,59424,16027%
Non-Markup Expenses95,44993,2892%
Profit Before Tax53,03028,88184%
Profit after Tax30,91315,50099%
Earnings per share21.0610.45
Dividend per share4.255

Going onwards, outlook on the bank remains stable amid HBL’s large investment in high yielding government securities, selective loan-book growth and adequate capital buffer.

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