Karachi, April 20, 2023 (PPI-OT): BAHL - 1QCY23 Result Review

Bank Al Habib Limited (BAHL) announced its 1QCY23 earnings earlier today, wherein the bank posted NPAT of PkR10.5bn (EPS: PkR9.5)- significantly higher than our expectations-posting an increase of 4.7xQoQ and 1.1xYoY. The earnings beat was largely driven by the reversal posted during the quarter, with the heightened FX income.

Net interest income for the quarter clocked in at PkR24.6bn, largely in line with our estimates, and higher by 7%QoQ and 54%YoY. Mark-up earned saw an increase of 10%QoQ, while the mark-up expensed witnessed an increase of 12% in the same period.

NIMs for the quarter are estimated to have stood at ~4.9%, having slightly improved from the 4.7% in the earlier quarter. The NIMs expansion can be attributed to the heightened interest rate environment prevalent in the country.

Further boost to the bank's earnings came in the form of heightened non-interest income, which saw a growth of 24%QoQ. This was driven by higher Foreign Exchange income in 1QCY23, clocking in at PkR2.7bn, higher by 74%QoQ.

The absence of provisions in the outgoing quarter also led the surprise in earnings in 1Q, with the company posting a reversal of PkR952mn, against our expectations of a PkR2.7bn provision during the quarter. To recall, the bank had posted a mammoth PkR10.4bn provision in 4QCY22, driven by the sovereign downgrade from international rating agencies, triggering an IFRS-9 related provisioning.

The bank's cost to income ratio has marginally deteriorated in 1QCY23, clocking in at 50% during the period, as compared to 48% in the previous quarter. Non-markup expenses for the quarter have been recorded at PkR15.3bn, higher by 15%QOQ and 29%YoY.

Another factor that aided the bank's earnings was the lower taxation rate during the period, whereby the effective tax rate for the quarter clocked in at 36%, compared to 57% in the earlier quarter.