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Bank Al Habib (BAHL): 1Q2019 EPS of Rs1.8, -1% YoY (-18% QoQ) (In-line with expectations)

 

• Bank Al-Habib (BAHL) reported earnings of Rs2bn (EPS Rs1.8), almost flat YoY, in line with our estimates.
• Net Interest Income (NII) of the bank registered an impressive growth of 40% YoY, highest so far among conventional banks who have announced their 1Q2019 results. On quarterly basis, NII was up 18%.
• The bank booked a provisioning of Rs725mn during the outgoing quarter vs. reversal of Rs294mn in similar period last year. The charge was related to cyclical industries, as per channel checks.
• Non-interest income of the bank was up 27% YoY in 1Q2019, majorly driven by increase in fee and commission income, +34% YoY.
• On the other hand, non-interest expense of the bank increased by 22% YoY during the outgoing quarter, led by 21% YoY increase in operating expenses. Operating expenses increased on account of charges incurred on branch network expansion.
• While pretax earnings of BAHL were increased by 31% YoY in 1Q2019, net earnings remained almost flat on account of higher effective tax rate, +15ppts YoY to 54%.
• To note, the govt. in its last economic reforms package imposed super tax on banks for the year 2017 to 2020, due to which banks are now recording additional super tax (2017 annual earnings) in their 1Q2019 accounts.
• Key risks for the company include 1) lower than expected hike in interest rate, 2) lower than expected advances and deposit growth, and 3) deterioration in Pakistan macros.