Bank Al-Habib’s Earnings Climb in First Quarter Amid Provisioning Reversal

Karachi: Bank Al-Habib Limited (BAHL) reported a notable increase in profits for the first quarter of the calendar year 2025, driven by a significant reversal in provisioning. The bank announced a profit of PkR10.2 billion for the quarter, representing a 2% year-over-year and 50% quarter-over-quarter increase. Despite this growth, the cash payout of PkR3.5 per share fell short of market expectations.

The net interest income (NII) for the quarter was PkR33.6 billion, showing a decline of 10% year-over-year and 15% quarter-over-quarter. This drop was primarily due to a decrease in mark-up earned, which overshadowed a decline in mark-up expensed. Mark-up earned fell by 22% year-over-year and 18% quarter-over-quarter to PkR92.9 billion, largely attributed to lower yields on investments and advances. The bank’s net interest margins (NIMs) decreased to 4.6% from 6.2% in the same period last year.

Non-interest income saw a slight increase, reaching PkR7.7 billion, up 2% year-over-year and 30% quarter-over-quarter. This improvement was supported by higher fee income, which grew by 28% year-over-year, although foreign exchange income declined by 15% year-over-year.

A key factor in the bank’s improved earnings was a provisioning reversal of PkR1.2 billion, contrasting with an expense of PkR6.9 billion and PkR3.0 billion in the first and fourth quarters of the previous year, respectively.

Operating expenses rose to PkR21.9 billion, an 18% year-over-year increase, resulting in a cost-to-income ratio of 53%. This is up from 42% in the first quarter of 2024 and 48% in the last quarter of 2024.

The effective tax rate for the quarter was 50.4%, compared to 47.8% and 67.2% in the first and fourth quarters of the previous year. This increase is attributed to higher effective tax rates for banks that took effect last year.

BAHL maintained its dividend payout at PkR3.5 per share for the first quarter, with a payout ratio of 38%. Analysts have a ‘BUY’ stance on BAHL, with a target price of PkR163 per share by December 2025, alongside a dividend yield of 10% over the same period.