Dear Clients,

– Habib Bank Limited (HBL) reported CY20 result today posting Profit after Tax (PAT) of PkR30.9bn (EPS: PkR21.0, up 99%Y/Y. Earnings were below our estimates amid higher than anticipated provisioning.

– The company announced a final cash dividend of PkR3.0/sh that took the full payout to PkR4.25/sh during CY20.

– Net Interest Income increased 28% Y/Y as a result of decline in interest expense by 10%Y/Y due to reduction in policy rate by 625bps.

– Non-interest income increased to 27% Y/Y largely driven by gain on sale of securities clocked in at PkR7.1bn as opposed to a loss of PkR2.7bn in corresponding period last year.

– Provisioning expense came in at PkR12.2bn against PkR3.3bn in corresponding period last year.

– Operating expenses increased 2%Y/Y to PkR95.4bn and the C/I ratio improved to 59% in CY20 as compared to 74% in CY19.

– During 4QCY20, the company posted a profit of PkR5.6bn (EPS: PkR3.8) down by 16%Y/Y and 44%Q/Q. This is on account of higher provisioning during the period that clocked in at PkR3.7bn.

– Operating expense increased by 2%Y/Y and 4%Q/Q to PkR23.5bn. The cost income ratio improved to 63% in 4Q2020 as against 66% in the corresponding period last year.

– We have an Outperform rating on HBL with a target price of PkR176/sh. The stock offers a dividend yield of 7.5% and is currently trading at a one year forward P/Bv of 0.73x.

Regards,
KASB Research