After $225 Million Penalty, HBL Posts Rs. 14 Billion Losses During 3Q 2017

Habib Bank Limited has received a shock of Rs. 14.12 billion losses in the third quarter of 2017, majorly due to hefty penalty of US$ 225 million and its settlement payment made to the New York State Department of Financial Services.

The bank still managed to remain in the profits for the first nine months of 2017 that stood at Rs 1.55 billion as against of Rs. 25.7 billion recorded in the same period of 2016.

Excluding the impact of the settlement payment, HBL’s consolidated profit after tax for the first nine months of 2017 is Rs 25.3 billion, and pre-tax profit for the first nine months of 2017 is Rs 42.5 billion, both 2% lower than for the same period in 2016.

According to the financial results, its consolidated profit before tax for this period is Rs 18.8 billion, with earnings per share of Rs 0.87. As a result of the settlement payment, the consolidated Tier 1 CAR as at September 30, 2017 has reduced to 10.6%, with the total CAR at 13.6%.

Net interest income for the nine months ended September 30, 2017 reduced marginally, to Rs 62.0 billion, due to the spread compression caused by falling investment yields and competitive loan pricing. Non mark-up income of Rs 26.3 billion for 9M 2017 was 18% higher than for 9M 2016.

Fees and commissions rose 13% to Rs 15.5 billion. The main contributors to the fee growth were home remittances, card related and consumer financing fees and asset management.

Treasury related income increased by 43%; although capital gains contributed the majority of this growth, all segments demonstrated strong performances. The Asset Quality ratio improved to 8.2% as at September 30, 2017 and the coverage ratio was 91.4%.

While HBL’s capital ratios still remain above regulatory requirements, the Bank will be taking all measures necessary to restore its capital ratios to their previous levels as early as practically possible.

Consequently, the Board of Directors, in its meeting held on October 20, 2017 has not declared an interim cash dividend for the quarter ended September 30, 2017. HBL had already declared and paid interim cash dividends of Rs 7.00 per share (70%) for the first two quarters of 2017.

HBL Deposits Highest in Banking Industry

HBL deposits remained the highest in the banking industry of Pakistan. Its deposits have continued to grow, reaching Rs 2.03 trillion, and the Bank’s market share increased to 14.4%. The growth in deposits has come entirely through increases in CASA, with the domestic CASA ratio improving from 85.5% in December 2016 to 87.4% in September 2017.

Domestic current accounts crossed Rs 600 billion, and the current account ratio as at September 2017 was 35.0% compared to 34.8% in December 2016. HBL has also stepped up its lending activities, with net domestic advances increasing by 14% over December 2016 and total net advances reaching Rs 847 billion.

HBL’s Strategy Going Forward

HBL’s board and management have taken serious note of the control and compliance issues.

The Board and the Bank said that they are committed to pursuing the highest standards of governance and have taken steps of structural changes and necessary remediation measures to ensure that HBL moves swiftly to deal with any unforeseen situations.

The board reiterated its objective of promoting a “zero tolerance” compliance culture and will take steps to ensure that this permeates through all levels of the organization.


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  • ImranG

    Should have explain whats this penalty of US$225 million?

    • The management of Habib Bank Limited has decided to shut down its branch and operations in New York due to tough regulatory challenges by the US authorities.

      In a stock filing submitted by Habib Bank Limited (HBL) to the Pakistan Stock Exchange today, the bank has decided to wind up its operations in New York city in an orderly manner.

      Formal steps will be taken accordingly after an application is filed regarding this matter. The authorities have already allowed the bank to submit the application.

      New York State Department of Financial Services (DFS) announced to impose civil monetary penalties of up to $629.625 million on HBL. The bank management has decided to contest the decision as part of its scheduled administrative hearing in the United States.

      In December 2015, US FED issued a cease and desist order asking the bank not to increase its aggregate US dollar clearing activities and compelled to avoid any new foreign correspondent accounts or new accounts.

      The US authorities slapped Pakistan’s largest bank with a strict enforcement order, saying that they found “significant breakdowns” in the bank’s anti-money-laundering program, which was found to be not in compliance with US federal laws.

      According to Wall Street Journal report, HBL has hired new staff and a third-party consultant to resolve the matter as per the requirements of the Federal Reserve authorities.

      An HBL official at New York assured the authorities that it would take instructions from regulators very seriously and everything would be fixed according to existing rules.

      Apparently US authorities were not satisfied with HBL’s measures complying with US regulations, hence a heavy penalty was imposed on the bank.

      According to an estimate, the penalty will negatively impact the bottom-line of the bank for a period of more than one year. During 2016, HBL’s consolidated profits stood at $323 million and such a heavy fine could have an impact of Rs 45/share on the upcoming earnings. However, there is a chance that SBP might allow HBL to book the loss in a staggered manner.

      • ImranG

        That means the actual loss will be around US$ 629 million carried forward in future years.

  • Shahid Iqbal Butt

    They got this bank free of cost from Musharraf to support him internationally.

  • Ali

    structural changes mean, they will start firing the employees (who have nothing to do with this crap and their damn policies). Damn corporate culture of cost reduction and structural changes.