Bank AL Habib Limited (PSX: BAHL) has reported a 4.59% year-on-year increase in its profit after tax for the first quarter ended March 31, 2025. The bank’s earnings reached Rs10.72 billion, up from Rs10.25 billion recorded in the corresponding period of the previous year. This growth comes despite a notable decline in net interest income, showcasing the bank’s ability to diversify its revenue streams and control its credit-related costs.
In line with its earnings performance, BAHL has announced an interim cash dividend of 35%, equivalent to Rs3.5 per share. The bank’s earnings per share (EPS) also rose to Rs9.65 from Rs9.22 in Q1 2024, reflecting a 4.66% increase.
While the bank’s core interest-based income experienced pressure, with net interest income falling by 9.38% to Rs33.64 billion, the broader financial picture remained resilient. This decline was primarily driven by a 22.39% drop in interest earned, which stood at Rs92.97 billion, compared to Rs119.78 billion a year earlier. At the same time, the cost of funds eased significantly, with interest expenses declining by 28.23% to Rs59.33 billion.
A major contributor to the bank’s overall earnings strength was a 7.45% rise in non-mark-up income, which totaled Rs8.6 billion. Within this segment, fee and commission income saw a substantial growth of 31.97%, reaching Rs6.06 billion, supported by increased customer activity and digital banking transactions. Other components such as foreign exchange income and miscellaneous income provided modest contributions, although income from derivatives turned negative, incurring a loss of Rs244 million. Additionally, the share of profit from associates dropped by 31.08%, reflecting sectoral or investment-specific challenges.
On the expense front, Bank AL Habib witnessed a surge in operating costs, which increased by 19.23% to Rs21.63 billion. Total non-mark-up expenses followed suit, rising 18.04% year-on-year to Rs22.07 billion. The increase in expenses reflects continued investment in infrastructure, technology, and compliance enhancements.
However, the bank made a significant turnaround in its credit portfolio, reporting a net reversal of Rs1.16 billion in credit loss allowances. This marked a strong recovery from the Rs6.87 billion charge in the same quarter last year, underlining improved asset quality and effective risk management.
As a result, profit before taxation rose by 9.06% to Rs21.34 billion. Taxation, however, increased by 13.98% to Rs10.61 billion, somewhat offsetting the gains made at the pre-tax level. Nevertheless, the bank successfully closed the quarter with a solid bottom-line performance.
Despite the challenges posed by lower interest income and rising costs, Bank AL Habib has demonstrated strong resilience and operational efficiency in Q1 2025. With growing non-interest income and improved credit conditions, the bank remains well-positioned to navigate the evolving banking landscape.
The performance signals a strong start to the financial year for BAHL and reflects the bank’s adaptability in balancing profitability with prudential risk management in a dynamic economic environment.