Habib Bank Limited (HBL) held a conference call for Analysts and Investors today. The management reviewed 2Q2020 results and gave guidance regarding the future outlook of the bank. Key highlights of the conference call were:

Most of the costs related to the closure of its New York branch have been incurred. HBL spent ~USD30mn in closure related costs during 1Q2020 which are down to under USD5mn during 2Q2020. The bank expects further reduction in this cost in the 3Q-4Q2020 and a complete wind up by the end of this year.

The Pakistan Bankers Association (PBA) is taking up the discussion with the central bank regarding the implementation of IFRS 9. Given the uncertainty prevailing due to COVID19 and the amount of work required by the banks to implement IFRS 9, the implementation of IFRS 9 could be postponed till early CY22.

HBL’s mortgage finance is a little over PkR1bn while lending to housing and construction sector is a larger number. The plans to increase the allocation to construction sector to 5% of loan book as advised by the central bank are under progress on an industry level.

On the international front, the NPLs arising from one major client has been reasonably covered. On the domestic front, there will be challenges for the next 12-18 months and the bank has taken general provisions of PKR2.4bn to cushion itself from any potential shocks.

Due to sharp monetary easing, sudden repricing of the advances led to margin expansion. Margins are expected to go down in 3Q2020 and further compress in 4Q2020 as advance and investment books re-price.

Deposits are expected to grow at 10%-12% on annual basis and HBL is expected to maintain its market share of 14% going forward.

HBL has so far deferred ~PkR85bn worth of loans under incentive scheme offered by the central bank to cater the economic impact of COVID19.

The US dollar open position has been significantly winded down, due to which the bank’s non-core income did not take a hit despite sharp currency depreciation during the quarter.

The management believes that we are at the bottom of the interest rate cycle and there is very less room for further monetary easing.

Please find attached the detailed report.


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Kasb Research
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