Bank AL Habib (BAHL); 2Q2024 EPS at Rs10.2, up 50% YoY

Staff report: Bank AL Habib (BAHL) announced its 2Q2024 result on Wednesday, where the bank recorded its highest ever consolidated quarterly earnings of Rs11.4bn (EPS of Rs10.2), up 50% YoY and 11% QoQ. This takes 1H2024 earnings to Rs21.6bn (EPS Rs19.4), up 19% YoY. Alongside the result, the bank also announced a second interim cash dividend of Rs3.5/share in 2Q2024, taking the 1H2024 dividend to Rs7.0/share.

Net Interest Income (NII) for 2Q2024 settled at Rs37bn, up 42% YoY due to a rise in asset yields. However, QoQ, BAHL announced better than expected NII growth of 1% where interest earned was up by 3% to Rs123bn and interest expense was up by 5% to Rs86bn in 2Q2024. BAHL recorded a provision expense of Rs517mn in 2Q2024, which is substantially lower than in the last two quarters.Pakistan Banks’ Earnings to Fall 6% QoQ and Up 22% YoY in 2Q2024

To recall, in the last two quarters, BAHL reported a significantly higher provision charge of Rs12.1bn, with Rs5.2bn in 4Q2023 and Rs6.9bn in 1Q2024. This provision primarily pertains to the advances portfolio (mainly in the steel and textile sectors). BAHL’s FX Income clocked in at Rs977mn in 2Q2024, down 12% YoY and 61% QoQ. Operating expenses saw an increase of 26% YoY and 20% QoQ to Rs22bn in 2Q2024, driven by inflationary pressure and branch expansion, we believe.

Despite higher expenses, BAHL’s cost-to-income ratio improved to 50% in 2Q2024 compared to 55% in 2Q2023. The effective tax rate of the bank clocked in at 48% in 2Q2024, similar to what was recorded in 2Q2023 and 1Q2024. We maintain a buy stance on BAHL, with the stock currently trading at a 2024E PE ratio of 2.8x and a PBV ratio of 0.8x,” Topline said.