How is HMB handling financial challenges to grow?

Habib Metropolitan Bank Limited (HMB) recently released its second-quarter results for 2024, revealing a mixed financial performance.

The results reflect the bank’s ongoing efforts to manage the challenges of a dynamic economic environment while also highlighting areas of growth and opportunity.

Earnings under pressure

In the second quarter of 2024, HMB’s profit after tax decreased by 7% YoY, amounting to PKR 5.82 billion.

This decline was primarily driven by a significant drop in net interest income, which fell by 16% YoY.

The squeeze on NII was a result of stagnant or lower yields on the asset side, coupled with an increased cost of funds due to higher remunerative deposits.

This trend underscores the challenges HMB faces in maintaining profitability amid fluctuating market conditions.

Despite the drop in NII, the bank managed to increase its non-markup income (NMI) by an impressive 42%.

This growth was largely driven by income from foreign exchange operations, which surged significantly, and strong capital gains recorded in the previous quarter.

These factors helped offset some of the pressure on the bank’s overall earnings.

Strategic focus on cost management

Operating expenses at HMB rose by 9% YoY during the quarter, which led to an increase in the bank’s cost-to-income ratio, reaching 43.31%.

This indicates that while the bank is generating income, rising costs are eating into its profits.

To navigate these financial challenges, HMB is focusing on improving operational efficiency and managing costs more effectively.

Looking ahead, HMB is poised to focus on enhancing its income streams, particularly in areas such as foreign exchange operations, where the bank has already seen substantial growth.

By managing its costs and capitalising on non-markup income opportunities, HMB is positioning itself to navigate the challenges ahead and maintain its competitive edge in the banking sector.

Source: Taurus Securities Limited