EUR 4.27 For Business Accounts Only

Habib Bank (HBL): 2QCY19 EPS Rs0.44, down 78% YoY, DPS Rs1.25 (Below expectations)

• Habib Bank Limited (HBL) posted earnings of Rs0.4/share, down by 78%YoY in 2Q2019 majorly due to higher operating cost, loss on FX, derivatives and sale of securities. Cumulative earnings during 1H2019 of the bank clocked in at Rs3.9bn (EPS: Rs2.54); down by 52%YoY.
• The bank announced a cash dividend of Rs1.25/share bringing total dividend to Rs2.5/share in 1H2019.
• Net Interest Income (NII) settled at Rs24bn; up by 20% YoY. On quarterly basis, NII grew by mere 4% QoQ, despite 200bps hike  in interest rate owing to lagged impact of repricing on loans.
• The bank’s non mark-up income recorded a massive attrition of 77%YoY to Rs1.3bn in 2Q2019 primarily on the back of recording  heavy losses in foreign exchange, sale of securities and derivatives amounted to Rs4.9bn.
• Non markup expenses of the bank recorded a considerable growth of 25% YoY during the outgoing quarter owing to 27% YoY higher operating expenses to Rs23.5bn vs Rs18.5bn in same period last year.
• Effective tax rate of the bank clocked in at 49% while in 1H2019 the said rate settled at 61%.
• Key risks for HBL includes: 1) lower than expected advances growth, (2) higher exchange and derivatives losses, and (3) Further penalties on international operations.