Pakistan's Habib Bank Profit Gains 25 Percent on Lower Bad Loan Provisions

Habib Bank Ltd., Pakistan’s second- biggest by assets, said second-quarter profit rose 25 percent as it set aside less funds for delinquencies on loans.

Net income on a consolidated basis climbed to 4.05 billion rupees ($47.3 million), or 4.03 rupees a share, from 3.25 billion rupees, or 3.19 rupees, a year earlier, the Karachi- based bank said in a statement to the stock exchange today. Revenue gained to 23.5 billion rupees 21.7 billion rupees a year ago.

“There is a significant decline in provisioning,” said Hifza Zia, an analyst at Karachi-based Elixir Securities Ltd. “The easing of rules by the central bank helped the lender reduce the burden.”

The central bank began requiring lenders to set aside more funds to cover delinquent borrowers in October 2007, and then eased rules in January 2009, allowing banks to use 30 percent of the value of assets provided as collateral to meet requirements for provisions against defaults.

Habib Bank’s provisions and write-offs fell to 1.77 billion rupees in the second quarter, from 2.74 billion rupees a year ago, according to the statement.

Shares of Habib Bank fell 0.7 percent to 106.01 rupees at 3:11 p.m. local time on the Karachi Stock Exchange today. The stock has fallen 5.5 percent this year.

To contact the reporter on this story: Farhan Sharif in Karachi at fsharif2@bloomberg.net

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