HBL posts disappointing first quarter Earnings, Analysts still positive on Stock Perforamance

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HBL posts disappointing first quarter Earnings, Analysts still positive on Stock Perforamance

  • HBL posted Net profit of Rs. 4.108 billion, down by 38% from last quarter

Habib Bank Ltd (HBL) declared its 1st Quarter 2020 financial result with net profit of Rs. 4.108 billon as compared to Rs. 3.17 billion in first quarter of last year, marking an increase of 34%YoY. However, earnings were 38% below than the earnings of December-2019 quarter.

Earnings per share stood at Rs2.79/share. The result is accompanied with a cash dividend of Rs1.25/sh. Earnings and Dividend declaration remained below market expectations, resultantly selling pressure was witnessed in the stock during last two sessions.

Interest Income, Capital Gain rises

In 1QCY2020, HBL recorded underlying income of Rs33.8 billion that increased by 13% YoY (down by 5% QoQ) primarily due to rise in net interest income by 20% YoY while non-interest incomes witnessed a decline of 13% YoY respectively.

The higher net interest income is mainly due to increased interest rate on earning assets that resulted positively into NIMs. On the other hand, HBL also increased its earning Assets (Loans + Investments).

During the quarter, the decline in non-interest income was mainly due to FX losses of Rs1.2b. The currency devaluation adversely impacted the FX open position of the Bank. Additional impact came from share of profit from associate which declined by 71% YoY. HBL also booked Rs2.3bn capital gain against equity Investments and selling of PIBs.

HBL booked provisioning of Rs0.6bn during the quarter against Non-Performing Loans, relatively a modest amount but raising concerns of Rising NPL’s going onwards.

Non-interest expense increased by 20% YoY due to rise in admin expenses by 20% YoY. The bank’s effective tax rate stood at 42%.

Outlook

Analysts at Pakistan Stock Exchange has bullish outlook on the stock, where they expect that bank’s Cost to Income Ratio may improve later in 2020 which will increase the earnings going onwards.

However, risks remain as aggressive lending strategy of the bank, make it susceptible to recessionary pressure in the economy that may lead to increased provisioning.

Adnan Syed Administrator
Adnan Syed is an Ex-Banker and Founder of TheMint.Pk. He is an investor, partner, and advisor to different Businesses. He has special interests in E-Commerce, Stock Market and Digital Assets.
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Adnan Syed Administrator
Adnan Syed is an Ex-Banker and Founder of TheMint.Pk. He is an investor, partner, and advisor to different Businesses. He has special interests in E-Commerce, Stock Market and Digital Assets.
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