Global Bank Equity Specialist, Creative Portfolios

Paul Hollingworth

Global Bank Equity Specialist

Creative Portfolios

Equity Bottom-Up

<p><a href="https://www.smartkarma.com/entities/habib-bank-ltd" target="_blank" data-smartkarma-citation="entities:371:1" rel="noopener">Habib Bank Ltd (HBL PA)</a> </p><p>To date, FY20/19 <strong>PH Scores™</strong> out of Pakistan have caught the eye again relative to SE Asia and other global jurisdictions.</p><p><strong>HBL</strong> dedicates itself to mainly corporate lending (manufacturing, utilities, government etc) and to a much lesser extent the consumer segment, backed by source of funding from CASA funding (82%).</p><p>The bank compares well to peers of a similar size and business model with its low LDR, a high ROA, ROE, NIM, and an elevated Total Capital Ratio.</p><p>FY20/19 results show positive fundamental momentum and trends with improvement in Profitability, in Efficiency, in NIM/Spread, in Liquidity, in headline Asset Quality, and in Provisioning while some- though not all- Capital Adequacy ratios (Equity/Assets and Basel III Leverage Ratio) showed some lightweight erosion. Growth in “Core Income” was vibrant, supported more by gains of Interest Income on Securities and reduced Funding Costs from Interest-bearing Liabilities than by a modest expansion of the Balance Sheet. In addition, “non-core Income” streams (such as trading gains) showed dynamism, covering the sizeable increase in LLPs. All in all, Comprehensive Income expanded by 35% YoY.</p><div class="content-highlight"><p>A FV of 7%, a PBV of 0.68x, and an Earnings Yield of 18.2% are not unappealing for a small GEM fund. The bank commands both a high PH Score™ (9.7) and top decile VFM ranking which captures strong fundamental trends, low valuation, and an oversold trading condition.</p></div><div><div><div class="content-highlight"><p>VFM expresses an asset according to its value-quality characteristics (PH Score™), its technical picture, and an additional valuation filter. HBL is in the top decile globally.</p></div></div></div><div class="content-highlight"><p><span>The PH Score™ is a fundamental momentum-quantamental score that scores banks according to changes in value-quality. The Score encompasses Profitability, Operating Efficiency, Liquidity, Capital, Asset Quality, and Coverage as well as a valuation variable. Scores lie between 0 and 10, with higher scores representing more positive signs. The PH Score™ was back tested over 2007-17 for global banks and conclusively shows progressively higher returns across quintiles ranked by Score. </span></p></div>

Habib Bank Ltd (HBL PA) To date, FY20/19 PH Scores™ out of Pakistan have caught the eye again relative to SE Asia and other global jurisdictions.HBL dedicates itself to mainly corporate lending (manufacturing, utilities, government etc) and to a much lesser extent the consumer segment, backed by source of funding from CASA funding (82%).The bank compares well to peers of a similar size and business model with its low LDR, a high ROA, ROE, NIM, and an elevated Total Capital Ratio.FY20/19 results show positive fundamental momentum and trends with improvement in Profitability, in Efficiency, in NIM/Spread, in Liquidity, in headline Asset Quality, and in Provisioning while some- though not all- Capital Adequacy ratios (Equity/Assets and Basel III Leverage Ratio) showed some lightweight erosion. Growth in “Core Income” was vibrant, supported more by gains of Interest Income on Securities and reduced Funding Costs from Interest-bearing Liabilities than by a modest expansion of the Balance Sheet. In addition, “non-core Income” streams (such as trading gains) showed dynamism, covering the sizeable increase in LLPs. All in all, Comprehensive Income expanded by 35% YoY.A FV of 7%, a PBV of 0.68x, and an Earnings Yield of 18.2% are not unappealing for a small GEM fund. The bank commands both a high PH Score™ (9.7) and top decile VFM ranking which captures strong fundamental trends, low valuation, and an oversold trading condition.VFM expresses an asset according to its value-quality characteristics (PH Score™), its technical picture, and an additional valuation filter. HBL is in the top decile globally.The PH Score™ is a fundamental momentum-quantamental score that scores banks according to changes in value-quality. The Score encompasses Profitability, Operating Efficiency, Liquidity, Capital, Asset Quality, and Coverage as well as a valuation variable. Scores lie between 0 and 10, with higher scores representing more positive signs. The PH Score™ was back tested over 2007-17 for global banks and conclusively shows progressively higher returns across quintiles ranked by Score. 

Habib Bank Ltd

Habib Bank: Stands Out Versus Peers