PACRA Maintains the Entity Ratings of Habib Metropolitan Bank Limited

Habib Metropolitan Bank (HMB) along with its formidable position in meeting trade-related needs and being a frontrunner in the industry, offers a full range of Corporate, Commercial, and Retail products and has a strong customer base across these segments. HMB SIRAT is also a key area of focus for HMB, as the share of Islamic branches has grown to 40% during CY24. Its strong brand, skilled bankers, and strategic partnership with Habib Bank AG Zurich (HBZ) contribute to its success. HBZ is a global financial institution, a strong and well-capitalized bank, with over 550 branches across eight countries. Owned and managed by the Habib Family, HMB is ranked amongst the financially strongest banks in Pakistan owing to backing from HBZ, reflected by one of the strongest CAR in the industry. Along with regular dividend payout over the years, the CAR remained well above the regulatory threshold with no inclusion of subordinated debt. At end-Dec23, the CAR improved to 18.3% (end-Dec22: 14.6%), with one of the strongest compositions of Tier I CAR in the industry. The hallmark of HMB is its envious presence in the trade business, a sustainable and diversified source of revenue. The long association of personnel with HMB solidifies the management quality. During CY23, the Bank experienced substantial growth in digital banking usage attributable to the bank's strategic efforts to enhance digital offerings. At end-Dec23, the deposit base of the bank increased by 15% to stand at PKR 1,012bln (end-Dec22: PKR 881bln) with an equal proportion of CA and SA. The growth in the CA has been consistent over the years. The gross performing advances were recorded at PKR 418.8bln (end-Dec22: PKR 433.7bln) with the infection ratio declining to 4.5% (end-Dec22: 4.8%). Over the years, the bank has maintained an intact market position. The bank is maintaining a shorter duration in the investment book, which will allow it to reinvest maturing securities into higher-yielding securities. During CY23, the PAT strengthened by 71% to stand at PKR 24.4bln (CY22: PKR 14.3bln). CY23 remained a challenging year for the economy inclusive of a drop in exchange reserves, currency devaluation, and peak inflation. The Central Bank maintained a tight monetary policy stance. Despite these, CY23 was successful for the banking industry. The sector outperformed historical statistics, with two-thirds of net markup income coming from investments in government securities and the remainder from advances. Looking ahead, with the expected monetary rate cut, banks are likely to sustain some dilution in profitability by CY24.
The ratings are contingent upon the management’s ability to strengthen the bank’s position in the banking industry as a whole and specifically in its market niche of trade finance, amidst rising competition. Any deterioration in asset quality would consequently impact the bank’s profitability and its capacity to absorb risks. Going forward, the development of competitive market share will remain important for a positive transition in the ratings of the bank.

About the Entity
HMB, commencing operations in 1992, is listed on the PSX. HMB is a subsidiary of HBZ and makes a substantial contribution towards the consolidated assets of HBZ. HMB has a branch network of 525 branches inclusive of 117 Islamic branches. The Board of Directors consists of nine members, including the CEO and three independent directors. Among the members, there are five non-executive directors, with four of them representing HBZ. During CY23, Mr. Khurram Shahzad Khan appointed as the CEO of the bank after Mr. Mohsin Ali Nathani. Mr. Khurram is a seasoned banker with over 38 years of experience with local and multinational financial institutions.