IGI Securities Limited – HBL: Conference Call takeaways

Karachi, May 04, 2015 (PPI-OT): HBL bank has posted PKR 9.9bn (EPS: PKR 6.8/share) in 1QCY15; up by 63%YoY. Primarily, this is driven by i) Average balance sheet growth of 17%, ii) NIMs up by 1.13xYoY due to shift in investment portfolio from shorter tenure T-bills to longer tenure PIBs and iii) 300bpsYoY Growth in current accounts. The management of the bank also expects Current account to bring down its cost to income which is currently hovering below 40%.

The management plans to expand investments in PIBs by double digit growth from last year along with this expansion in consumer and Agri financing together will support the top-line.

Investment composition analysis reveals that the bank has shifted its investment strategy towards shorter tenor papers in the 1QCY15. T-bill now comprises 54% of investments versus 49% in Dec’14. Similarly, PIBs reduced to 28% against 33% in the previous quarter.

On the advances front, ADR went down by 3.7%YoY mainly due to repayments in corporate sector and downward trend in loan book from international operations owing to UK. Also, the bank is looking to participate in syndicate financing of projects currently signed under Pak-China agreement. However, bank foresees flattish growth in advances during CY15 but will cater any upcoming opportunity while remaining in the risk appetite.

Banks NPLs remained subdued during the 1QCY1 to PKR 79bn resultantly; infection ratio went by a meagre 3% to 12.4% versus 12.0% in 4QCY14. Further, the bank recorded provisioning amounting to PKR 483mn in 1QCY15 which resulted in coverage ratio to uptick by 28bpsQoQ to 83.5% against 83.2% in 4QCY14.
Growth in non-mark-up income was mainly driven from gain on sale of securities owing to a breakup of 40% and 60% from bonds and equity market trading. Also banks fee income improved by 44%, owing to strong performance from bancassurance and investment banking.

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