In Focus: HBL (15082008)

Recently announced 1H08 results of UBL remained in the band of expectation as bank post the earnings of Rs8.44 per share and after tax profit of Rs6.35 billion, showing the decline of 3.45 percent in bottom line earnings YoY, while in 2Q alone, HBL posted the after tax profit of Rs2.47 billion and EPS of 3.26.
On the basis of PE and PBV valuations we hold 6M target price of Rs252 for UBL considering the FY08 EPS of Rs18. The scrip is currently trading at discount multiples of 8.91x and counts an upside potential of 57 percent in medium term.
Results Highlights
Due to consistent increase in discount rates during FY07-08, markup interest income increased by 22.2 percent to Rs27.566 billion (yoy) during 1H08, while due to flooring of 5 percent on PLS accounts returns, markup expense grew by 33.9 percent to Rs11.04 billion (yoy). Provisions to NPLs and other bad debts remained relatively low during 1H at Rs1.119 billion compared to other peers, concluding the net interest income with the decline of 13 percent to Rs15.40 billion.
Being a leading player banking industry and keeping high operational penetration in both urban and rural areas, HBL posted the non interest income of Rs4.52 billion during 1H showing the growth of 5.67 percent, while non interest expense grew considerably by 18 percent (yoy) to Rs9.621 billion during 1H.
Counter to the derailed economic situation, bank’s core business remained strong, as deposits showed the growth of 11 percent to Rs563.55 billion during 1H08, relative to FY07, the reason of which is the HBL’s strong market presence.
Accompanied with deposits, total advances also grew by good pace of 7 percent to Rs388.6 billion, among which 6.45 percent of advances amounting Rs25.10 billion has been placed under non performing status.
With a global recession in regional financial markets, investment showed the declining trend in 1H, as they declined by 4.4 percent to Rs164.4 billion compared to FY07 closure of Rs171.9 billion.
Total assets of the bank increased by 6.21 percent to Rs696.5 in 1H, while total liability also increased by 6.05 percent to Rs634.08 billion.