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HBL_Analyst Briefing Takeaways, (AKD Off the Analyst's Desk Nov 28, 2022)

HBL: Analyst Briefing Key Takeaways

Habib Bank Limited (HBL) held its 3QCY22 corporate briefing earlier today, wherein the management apprised of the following:

• To note, HBL posted earnings of PkR15.99/sh for 9MCY22 period, lower by 12% compared to the SPLY—attributable to the retrospective taxation charge levied during the period (taxation up 65%YoY). The bank’s net interest income was up by 19%YoY in the 9MCY22 period, while total revenues were up by 24%YoY.
• The bank’s customers have grown by 19% between Dec’21 and Sep’22, with the customer count ending at 32.5mn last quarter, with a branch network spanning 1,729 branches. In terms of deposits, HBL holds a market share of 12.5%, with total deposits of PkR3.4tr.
• At the end of 3QCY22, HBL’s Advances to Deposit Ratio (ADR) stood at 50.9%, as compared to 44.6% at the end of CY21—shielding the bank from heightened taxation. The bank achieved the higher ADR through an increase in Advances (increased by PkR208.2bn between Dec’21 and Sep’22), with a simultaneous dip in Deposits (down PkR11.6bn between Dec’21 and Sep’22).
• The majority of the deposits that were trimmed during the period were high-cost Term Deposits. To note, so far in the calendar year, HBL’s Current Accounts have increased by PkR127bn or 11%, whereas Savings and Fixed Accounts have dropped by 5% and 9%, respectively. Resultantly, HBL’s CASA stood at 81.3% as at Sep’22, compared to 79.5% in Dec’21.
• The management guided towards taking the necessary steps to keep ADR above the 50% threshold, through increased Advances disbursement, in a bid to not only safeguard itself against higher taxation, but also to fuel economic growth. 
• The bank’s infection ratio currently stands at ~5.08%—the lowest level in the past 15 years. Furthermore, the bank’s coverage ratio was recorded at north of 100% at the end of 3QCY22.
• Following the recent 100bps hike in policy rates, the bank expects NIMs to fall in the Dec’22 quarter, following which asset repricing is expected to kick in in 1HCY23, leading to an expansion in the bank’s NIMs.
• HBL’s Capital Adequacy Ratio (CAR) stood at 14.3% at the end of the quarter, compared to 15.3% at the end of CY21, with the bank attributing the drop to steep PkR devaluation.
• The bank is planning on issuing new Term Finance Certificates (TFCs), which would improve its CAR by ~60bps. This transaction would be concluded by the end of the year.