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.