Karachi: Habib Bank Limited (HBL) has reported a 12% increase in profit before tax for the first half of 2024, totaling PKR 29.6 billion, driven by robust net interest income and non-interest income, despite elevated provisioning and operational costs.

According to AKD Securities Limited, the bank’s Board of Directors announced an interim dividend of PKR 4.0 per share, bringing the total payout for the first half to PKR 8 per share. HBL’s return on equity stood at 17.0% with a book value of PKR 255, and the financial stability was further underscored by an increase in the Tier-1 Capital Adequacy Ratio to 12.65% and the total Capital Adequacy Ratio to 16.32%.

The Group’s profit before tax grew to PKR 57.8 billion, a 12% increase from the previous year, predominantly due to a significant 93% year-over-year increase in profit from international operations, which reached US$22.4 million. However, core domestic business profit before tax saw a reduction to PKR 55.1 billion, down from PKR 62.5 billion in the previous year, primarily due to higher provision expenses related to the implementation of IFRS-9 and one-off expenses.

Net interest income for HBL increased by 6% year-over-year to PKR 102.6 billion, influenced by volumetric growth despite a decline in net interest margins by 30 basis points, anticipating a rate cut. The bank’s non-interest income also saw a substantial increase, up 64% to PKR 40 billion, led by significant growth in fee income and remittance and Banca fees.

Administrative expenses climbed by 23% to PKR 69.5 billion due to ongoing inflation and continuous investment in technology, pushing the cost-to-income ratio to 51.9%. The bank’s provision expenses nearly doubled, largely due to adjustments under IFRS-9.

On the balance sheet, deposits grew by 17% over the previous period to PKR 4.8 trillion, with a notable increase in low-cost deposits, enhancing the CASA mix to 87%. The bank’s advances saw a marginal recovery from March levels but were lower than December 2023 figures, with domestic consumer lending and international advances showing growth. Notably, overseas advances increased slightly, reaching US$1.22 billion.

Looking forward, HBL’s management is focusing on achieving a domestic advance-to-deposit ratio of 50.0% by the end of the year and is optimistic about a 100-150 basis points rate cut in the upcoming monetary policy committee meeting. The bank’s investment portfolio has expanded significantly, with notable allocations in T-bills and Pakistan Investment Bonds.

AKD Securities maintains a “Buy” stance on HBL, with a target price of PKR 160, offering a potential 24.0% upside along with a 15.5% dividend yield.