M Jahnagir Hayat
LAHORE: Habib Bank Limited (HBL) continues to show dull and dismal performance as the bank profit before tax for the year 2018 has reduced by over 52 percent due to significant decline in total income and strange rise of Rs 14 billion in legal, professional and consultancy charges, the bank annual unconsolidated report indicated.
At the same time over rupees 4.63 billion unusual provisions and write-offs for the year under review against just Rs87 million’s provision in 2017 further deteriorated the profit earning of the bank.
However, due to the reduction of over 59.19 percent in taxation from Rs 19.75 billion in 2017 to Rs 8.05 billion in 2018 on the profit before taxation made the bank to post 52.56 percent increase in the profit after taxation.
The bank earned Rs 76 billion net mark up, return and interest income in 2018 against Rs 77.630 billion same period last year 2017.
Experts suspect vested-interest are also being served in the name of
consultancy, legal and professional charges, Rs 4.63 billion unusual provisions
The total non-mark up income of the bank also showed a declining trend due to the heavy loses of Rs 3.299 billion cutting down the total non mark up income by 46.87 percent from Rs 30.95 billion to Rs 16.44 billion.
The report indicated that the operating expenses of the bank dramatically rose up by 25 percent from 56.23 billion in 2017 to Rs 70.33 billion in 2018.
The expenses included a strange rise of Rs 14 billion in legal, professional and consultancy charges, the report showed.
Furthermore the unusual and abnormal provisions and write-offs of over Rs 4.63 billion also added to the further deterioration of the profit earnings in 2018. Earlier, these provisions and write-offs were just Rs 87 million.
However, the mega reduction in the taxation slabs by the government proved a face-saving happening, the report exhibited.
A senior banker on the condition of anonymity told Daily The Business that Rs 14 billion in legal, professional and consultancy charges are eye opener and no way justifiable.
He said that such the heavy cost of legal, professional and consultancy and extraordinarily high provisions speak the volume of poor enforcement of the bank.
He said that the slap of hefty penalty of $225 million by the New York State Department of Financial Services has already inflicted heavy losses on the shareholders due to the incompetence of the top hierarchy including the then president and his team.
“The losses were sustained by the shareholders for the lack of ability of the top guns of the bank. This time again the shareholders have been made to face the consequences of the underperformance of the bank president and his team,” he said.
“Management expects to complete the consultancy project (involving revisiting banks’ risk, compliance, process, infrastructure etc) by Jun’19. HBL incurred PKR2.5bn on consultancy project in CY18. On legal/consultation charges relating to wind‐down of international operations, HBL has guided for ~20% reduction in cost in CY19 over CY18 (PKR5.2bn),” BNM Capital research reported.
Banking sector experts said that the inflated legal, professional and consultancy charges have been added due to the closure process of New York branch and this may also affect the current and the next year 2020’s balance sheet.
However, they also suspected trickery so far as the heavy consultancy and legal charges are concerned.
They said that it seems that the vested interest are also being served in the name of consultancy, legal and professional charges which must be probed by some independent forensic auditors.
When this scribe contacted HBL Media and Marketing head Naveed Asghar, he could not be reached despite several attempts.