Habib Metropolitan Bank Limited has released its consolidated financial results for the first quarter ending March 31, 2026, revealing a challenging start to the fiscal year. The bank reported a net profit after taxation of Rs 5.14 billion, representing an 18 percent decline compared to the Rs 6.24 billion earned during the same period in the previous year. This contraction in the bottom line is primarily attributed to a squeeze on core lending margins and a significant rise in operating overheads, which together overshadowed gains made in non-funded income streams. In response to the performance, the bank’s basic and diluted earnings per share fell to Rs 4.69, down from the Rs 5.80 recorded in the first quarter of 2025. Despite the dip in profits, the bank maintained its commitment to shareholders by declaring an interim dividend of Rs 2.5 per share.
A closer look at the bank’s core operations reveals notable pressure on interest income. Total markup and return earned by the bank fell by 6 percent year on year to settle at Rs 40.12 billion. Conversely, the cost of funds remained largely unchanged, experiencing only a marginal 1 percent decline to Rs 24.37 billion. This imbalance led to a 13 percent contraction in net markup and interest income, which dropped from Rs 18.08 billion in the prior year to Rs 15.76 billion. The shrinking spread between lending rates and the cost of maintaining deposits has become a focal point for the bank as it navigates a shifting interest rate environment.
While the core lending business faced headwinds, the bank’s non funded side showed positive resilience and growth. Total non markup income reached Rs 5.95 billion, marking a 9 percent increase. This growth was driven by a substantial 87 percent surge in net gains on securities and a 58 percent rise in dividend income. Additionally, foreign exchange income contributed significantly to the total, growing by 10 percent to reach Rs 2.21 billion. However, fee and commission income remained relatively stagnant at Rs 2.83 billion, failing to provide the additional boost needed to offset the losses in the interest income segment.
Operational challenges were further compounded by a sharp increase in expenses. Operating overheads surged by 20 percent during the quarter, reaching Rs 11.16 billion. This spike in spending contributed to a 19 percent rise in total non markup expenses, which hit Rs 11.37 billion. The combination of declining total revenue, which fell by 8 percent, and rising costs caused the bank’s profit before credit loss allowance to plummet by 26 percent. Analysts suggest that these rising costs reflect ongoing investments in infrastructure and human resources intended to support future growth, though they have impacted short term profitability.
A significant bright spot in the quarterly report was the bank’s improved asset quality and provisioning. Habib Metropolitan Bank recorded a net reversal of credit loss allowances amounting to Rs 304.10 million. This represents a remarkable turnaround from the previous year, when the bank had to book a net provision charge of over Rs 678 million. While this reversal provided a much needed cushion for the operational shortfall, it was not enough to prevent a 20 percent decline in profit before taxation. After accounting for a reduced taxation expense, the bank concluded the quarter with its final net profit of Rs 5.14 billion. Moving forward, the bank will likely focus on optimizing its cost structure and defending its interest margins to regain the momentum seen in previous years.
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