HBL Expects No Change in Policy Rate

Staff Report

Karachi: Habib Bank (HBL) management expects no change in the upcoming monetary policy meeting scheduled for May 5, 2025.

However, considering the macroeconomic outlook, they believe there is room for a further rate cut of 100 bps in 2025. The bank conducted its Corporate Briefing Session on Friday, where management discussed financial performance for 1Q2025 and future outlook.

Regarding the windfall income tax on its foreign exchange income for the years 2021 and 2022, management highlighted that they have paid the amount in accordance with the High Court’s decision; however, they did not quantify the amount.

HBL’s deposits grew by 1.8% QoQ to Rs4.5trn in 1Q2025. Management expects deposits to grow by 15-20% with a focus on Current Accounts in 2025.

HBL’s advances declined by 20% to Rs1.9trn, taking the gross ADR to 44% in 1Q2025. For the full year 2025, management targets Gross ADR of 42-44%.

HBL’s investment portfolio stands at Rs2.8trn as of Mar-2025. Of Rs2.8trn, Rs1.4trn (48%) is in Floater PIBs, Rs701bn (25%) in Fixed PIBs, Rs352bn (12%) in T-bills, and the remaining Rs415bn (15%) in other securities. The fixed-rate bond has a duration of 0.96 years.

The infection ratio of the bank increased to 5.3% in Mar-2025 compared to 4.3% in Dec-2024 and 5.6% in Mar-2024. HBL’s coverage ratio stands at 88.2% in Mar-2025 vs 88.9% in Dec-2024 and 83.3% in Dec-2023. Management highlighted that admin expenses grew by only 4%, which is well below the industry growth rate. Monetary Policy Survey; Majority expect No Change in Policy Rate

Capital Adequacy Ratio (CAR) of the bank stands at 17.9% as of Mar-2025, well above the regulatory requirement. To recall, HBL announced consolidated earnings of Rs16.6bn (EPS of Rs11.3), up 9% YoY and 15% QoQ. Alongside the results, the bank also announced a first interim cash dividend of Rs4.5/share. We maintain a buy stance on HBL, with the stock currently trading at a 2025E PE ratio of 4.1x, PBV ratio of 0.5x, and dividend yield of 12%,” Topline said.