Topline Raises HBL Earnings Forecasts for 2025-26 

Topline has revised our earnings estimates for Habib Bank Limited (HBL) upward by 24% and 19% for 2025 and 2026 to Rs46.2/sh and Rs46.3/sh, respectively.

This came following the incorporation of results and key takeaways from recent discussions with bank management.

HBL’s result came above industry expectations, primarily due to higher-than-expected Net Interest Income (NII) driven by deposit growth coupled with a flattish QoQ trend in non-interest expense.Learn How to avail HBL Home Loan

Deposits Growth and focus on current account: HBL reported a higher QoQ deposit growth of 17% in Jun-25 vs. the industry average of 12%. Within this, the current account balance has grown by 20% QoQ to Rs2.0tr, taking the current account mix to 38.8% in Jun-25 vs. 37.6% in Mar-25. While the current account mix in Dec-24 was 35.8%.

“We have revised our deposit growth to 20% for 2025 and 10% for 2026, in line with industry growth, while for HBL we have assumed current account mix at 39% in 2025 and 40% in 2026,” Topline said.

Cost-to-income ratio expected to remain under control: After witnessing the hike in cost-to-income from 74.3% in 2019 to 57.1% in 2024, the cost-to-income has come down to 56.0% in 1H2025. However, due to a decline in NIMs, to income ratio is expected to increase to 58% in 2H2025, taking the 2025 ratio to 57.0%. We have assumed a 59.0% cost-to-income ratio for 2026.

Provision: HBL has recorded a general provision of Rs12bn on its books, and as per SBP guidelines, it can retain these provisions until the end of 2026. Therefore, we can expect the bank to convert them into specific provisions, which would keep overall provisioning at a lower level until 2026.

Payout can be improved: HBL CAR increased from 17.7% in Dec-2024 to 17.9% in Jun-2025, well above the regulatory requirement. We expect HBL to maintain the current payout of Rs18/sh in 2025, while for 2026, we expect HBL to improve the cash payout to Rs20/sh.

Valuations: Topline has maintained our BUY stance on HBL; however, we have revised up our target price from Rs275/share to Rs305/share for Dec-2026, implying a total upside of 31% (including a dividend yield of 8%). The stock is currently trading at a 2025E PE of 5.4x, PBV of 0.8x, and ROE of 18%. 

Key Risks: Higher than expected decline in interest rates, Lower or Negative spreads on Repo Borrowings, lower than expected current account deposit growth as a key risk for the bank.