Habib Metropolitan Bank Limited ($HMB)

Good morning, and [Foreign Language]. Welcome to this annual exercise. What we do is, as always, we just start with our presentation. Numbers are already with you in detail. And me and my team, my colleagues, we will go through this presentation and then leave bulk of the time for question and answers, so that we can concentrate on that. So let's start.

I just wanted to point out that we remain a value-based organization. This is very important for us because what we believe is that these business cycles, they come and go, and times, they change, but values, they keep us in good stead. So that's what we feel this organization has grown on these values. Our major shareholder, Habib Bank AG Zurich, has also same values. So we feel that these values, they are extremely important for us. Similarly, our vision. You will see that we want to be the most respected financial institution, not the largest or any other ways that we are into. We are a customer-centric organization, and we want to remain that way. Our structure remains unchanged. There is no new subsidiary that we have started in the last year. There was only one foreign exchange company 2 years back. That company continues to grow in line with what State Bank directives are for that business. So market performance, I think I want to share my gratitude to the market, to our shareholders for this massive increase in our total market cap. And this is the result of hard work of the team as well as trust of the shareholders. So thank you very much for that. I just thought we'll show you how, in the last 2 years, this thing has moved. I think the biggest thing that we bring to the table, our strength is our major shareholder, Habib Bank AG Zurich. AG Zurich, it is not just the fact that it's an international bank and it is Swiss headquartered, it has FINMA as its main regulator. It also is a source of good practices, international practices for us. So from that point of view, I think this Swiss heritage, having Habib Bank AG Zurich as our main anchor owner, major shareholder is a major strength. The other strength that I want to point out is our loyal customer base. We have got customers which started working with us right from the day 1, and they still are our customers. So that has been a huge strength for us. We are a customer-centric company. And these customers, they are loyal to Habib Metro, they are loyal to the brand and the things that we stand for. Our other strength is our trade finance leadership position. This continues. In the last few -- recently, a few years, we have seen a lot of competition here, but we continue with our leadership position in this, especially the exports. Exports, we are clearly in a leadership position. In imports, there is this fluctuation. We have a diversified revenue base. We don't have dependence on one particular product only. Robust capital base. You have seen over the years, our capital base has been very steady. Our ratings have been AA+ for a long time, so showing our strength, and the effect of our Swiss heritage also. Islamic banking. Our brand is called SIRAT. This is an international brand, which is an export from Pakistan. We started this brand in Habib Metro and now the same brand is being offered in several other geographies by Habib Bank AG Zurich. So we feel proud of it that it's something Pakistani that we exported. There is an efficient use of capital with consistent returns. You have seen, as our EPS improved, so has our DPS, and payout ratios are pretty good. We are ranked among top 25 companies of Pakistan Stock Exchange. It's a huge pride for us. I wanted to point out this thing particularly that we feel that this digital footprint has been taken up very well by our customers. The conversion ratio to digital is excellent. Given our size and limited branches, we feel this is our future. This is banking's future. So we are ready for this. We have a very good conversion. We have what we call branch customers converted to digital. And the ratio is there, and you can see all of that. We don't have a credit card. But yes, our debit card is one of the most powerful debit cards in the industry. And if you see some other metrics like usage of SIRAT, it's a very good story there also. So branches, branch network, I'm sure you'll have questions around it. Let me just give you an idea that what we feel about it. We think that this branch network is adequate for us. We are increasing branches every year. We have an annual branch expansion plan. But we feel that we are not in any race for reaching any maximum number on number of branches. What we feel is that are we able to service our customers adequately or not. So you will be able to see that despite 562 branches, we have a reach in 229 cities, which are the main cities where we want to be. This is what our customer base wants us to be. This is where we are. We will increase branches if our customer base or digital offering together requires that we should have more branches. Every year, we have more branches. So that's it. Another point that I want you to note is conversion of Islamic branches. So in about 4 years, from 12%, we have gone to 43%. And this Islamic branches, new branches are mostly open in Islamic. Not entirely. But as I said, this is in line with customer requirements. So I want to point out that we have adequate number of branches. We have a very good geographic representation. And the city in which we have our major strength, we have multiple branches there, the main financial centers, all the 4 provinces. So this is my message here. CSR. As I said, we are a values-based company. This remains a huge pillar for us. Our main focus areas are education and health care. We also do other causes. Disaster relief has been a big one for us. But education and health care, we have programs going on, multiyear programs. We support communities in which we operate. We try to involve our staff into these activities. So that's beyond the rupee numbers that you see, volunteering people have been going into all these causes, the participation of the team and the communities that we operate in, that's a big for us. On financial performance, I'll just briefly play a couple of words -- couple of sentences, but this is what you are already aware of. Our deposits have grown after last year's loan growth. In '25, they have grown adequately. Current account of Islamic banking has grown well. Advances growth is also very satisfactory. ADR is where we want to be. This is about 50%, we have a range. So EPS, DPS, they are both very satisfactory. If you can see that CAR is above our own [indiscernible] return requirements. And I think in terms of return on assets and return on equity, we are very well placed. Especially if you see return on assets, you will find us as one of the leadership position among the industry. This is our third year running that we received Top 25 Companies Award of Pakistan Stock Exchange. This year, if I remember correctly, we had the highest, #1 in terms of rank. Another area which really supported that last year was this remittances growth. We have the highest remittances growth, and we achieved an award for that also. As I said, digital transaction volumes has been very heartening. And this is where the industry will grow. This is where our next generation, the Gen Z, will be growing. So we are there for them. Balance sheet and P&L. Well, we have seen this is healthy growth in all 3 areas, which is investments, advances and deposits. I'm happy to take any questions when the question-and-answer time comes. P&L, similarly, balance sheet KPIs, again, you can see this is 5-year CAGR we have given. As I said, we are not in any race to grow just for the sake of growth. We are a customer-centric campus. We grow where our customer requirements will take us. So in line with that, our strategy is. Similarly, profitability KPIs are also there. You see growth in almost all of them, and this is in line with our own metrics or our own KPIs. You would be able to see that in line with the stock exchange growth. This is again our PE has grown and our payout ratio. Along with other good banking companies, we have also grown. Breakup value, all of this show the growth story. Cost-to-income ratio remains under control. The increase that you see, while there is an increase of cost because of high inflation that we have all experienced and investments in future. Some of that cost has come from there. But this is also because of pressure on revenue because of interest rate reduction. Interest rates have gone down, so this pressure is there. Asset quality or what we call NPL ratio, that remains -- every year, it's improving, as you can see. And the more important point is that we are very well covered, very well provided for that. Our IFRS is fully implemented. Whatever provisions to be taken on portfolio basis, we have taken all of that, whether Stage 1, 2 or 3, and this is something -- we've got a good recovery scheme, and they continue to work with the customers which are in stress. Capital adequacy, I've already spoken about it. This remains satisfactory, 11.5% is what is minimum required. We are well above that. And we don't have any -- we haven't issued any subordinated debt. So there is huge room there also, and we are very well covered in [ OpEx ]. This is sectoral diversification of advances. We used to be really big in textile at a stage above 50%. Now as you can see, we have made it more diversified and this has helped us. This was as a part of strategy from the Board and management, we have more diversified. Some concentration will be there as we are a trade bank. And Pakistan exports, as you would know, are concentrated in textile. So you would expect more textiles from us. Textiles and rice, these two big exports, and you would expect us to be there. Investor mix, most of it is government of Pakistan, just like other banks. We will be able to provide you more details. I've got entire team is here, including our CFO and Treasurer. They will be able to answer any questions on this investments mix. SIRAT, this is what our Islamic banking brand is. As I mentioned earlier, we will see that this is very good. Deposits and advances, they both are growing very well, about 27% plus in both cases. And branches, yes, that's more than 27%, but we feel that advances and deposits will continue to outgrow conventional in SIRAT. So we will continue to see SIRAT balance sheet growing faster than the conventional balance sheet. This is again in line with our customers. The customer demand is there for this Islamic banking deposits and assets, and we are serving our customers. This [indiscernible] has been provided to you already. So if there are any questions on this, we'll take that. Otherwise, this has been already given IFRS-8 operating segments. So our focus areas remain [indiscernible] unchanged for us. Customer centricity, as I said, talent diversity and retention and shareholder returns. We will achieve these 2 low-cost deposits growth, Islamic banking, asset quality and recoveries. Our digital transformation, as I said, this is something which we are happy and this is something which is serving us well. In line with that is transaction banking and employee banking. Remittances, I told you, this is a huge growth for us. Trade app, as I said, this is our leadership position in [indiscernible]. So we have received a number of awards, as you can see on the screen. But the 2 that I would again mention, one is this PSX Top 25 Companies. This is third year running, [Foreign Language]. And also this highest growth in remittances. This is the big one in the forefront that you can see -- foreground, sorry. So this award is [indiscernible] remittances. And this is what we feel happy that any strategy that we put in place, we are able to execute it well [indiscernible]. So thank you very much. I have got -- my whole team is here for any questions and answers which you have.

We have got a question from Syed Murtaza Hasan. The first question is deposit growth, CAR mix and branch growth for 2026. So as I said, deposit growth, we will grow in line with the growth of M2, which is -- but [indiscernible] mix, we want to improve this, and we know that we will be -- this year, we'll be improving this. And branch growth, we have a number of branches that we have taken approval from State Bank. And in fact, in Q1, we have already opened 8 branches. So we will be opening more branches. But as I said, it's not really a huge thing for us. [ Yields are ] weighted average maturity of fixed rate for us.

Yes. So I'll take a stab at that. So our fixed rate portion has an average yield in the midst of 12 and 12.25, whereas the average duration for that portfolio is between 1 and 1.25 years. And if you want to have the average life, that's under 1.5 years.

Average spread over [ details ] on the floaters, I think that's the next question. That is around 1% over the benchmark rates, and the weighted average life is close to 3.3 years remaining. And of course, as you would know, a large majority of the floaters reset in October and April. So yes, a large portion of our floaters were reset in October, but the next reset is imminent in the next couple -- in a week or so.

Cost-to-income [indiscernible].

[indiscernible] under 50%, that's we are planning [indiscernible] within that.

And we have leading cost-to-income ratio in the industry.

Interest rates, I really can't, because it's a very complex thing. There are a lot of factors in that. But what we can, I think, safely say is that they have bottomed out. And any change that happens, we expect here upward change. But let's see. I mean, this is a very complex because of political situation, economy, a lot of things.

Nasheed Malik.

[Foreign Language]. Nasheed Malik here from Growth Securities. [Foreign Language]?

[Foreign Language].

So I think there are two questions and there's another question here, what's the mix of floating and fixed on the sovereign. So I think I will take that as well. So 58% of our overall sovereign portfolio is fixed. The remaining is floating. So I mean that should answer your question. One more point, I think, which I want to update here as well that nearly 36% of our portfolio will mature this year. So I think given what just the CEO mentioned, we expect rates, if there is a move up, so that puts us in good stead, in a good position here to capture the rate as and when they go up.

Fuzail, do you want to [indiscernible] on remittances also?

So remittances, again, as Khurram mentioned that we have consciously worked on growing our market share primarily to complement and support our trade franchise. So this has worked really well, and I think we have significantly increased our market share on remittances. So we remain aligned with our overall strategy on trade. So to maintain our trade leadership, we will continue to solicit remittances and grow it prudently. As we know from an industry perspective, it is now an expense instead of a profit, so we will continue doing that in a prudent manner to support our trade franchise.

To answer the question about the CAR, so it's about 30 to 35 basis point impact in the capital adequacy ratio for this conversion of [indiscernible] trading. So that's the answer.

Shiraz Ali [indiscernible].

Do we have any other questions?

We received some questions in advance before the meeting.

So remittance market share will be, depending on the average, about 3.5% to 4% of the industry volume.

Okay. We received some questions in advance. One question was what is the projected ADR for 2026 for Habib Metro?

So I think for the ADR, I think the way we have been maintaining it is, I think we see 50% ADR as a sweet spot. We have a guidance from our Board of ADR aim that we want to target gives us a fair room of flexibility. But I think we should, I think, remain near our sweet spot of 50% over the next 12 months.

Another question we received was regarding the projected EPS for 2026 and the share market price.

[indiscernible] It all depends on the [indiscernible]. [Foreign Language].

We have received another question. Waheed Rathore [Foreign Language]. I think it's a follow-up question. So the short answer to your question is yes. But I just want to reiterate that our duration for our fixed term portfolio is between 1 and 1.25 years. And more than half of that is maturing in this calendar year. I hope that answers your question.

And this Muhammad Waseem has also [indiscernible].

30, 35 bps.

No, no. [indiscernible]. Okay. That's already, we have answered that. [Foreign Language]. [Foreign Language], elaborate on this.

Muhammad Waseem, can we have some clarity on this question? Here is Muhammad Waseem.

[Foreign Language].

We do not see a major impact. See, basically, on [Foreign Language] both for fair disruptors as well as market [indiscernible] and other factors. So overall, I think we have enough room in our CAR, and I think we should be able to absorb [indiscernible]. Murtaza Hasan, the answer is yes, and it also includes Sukuk. We're talking about the total sovereign portfolio here.

Any other questions?

If there is nothing more, then we can [indiscernible].

If we don't have any other questions, we can conclude.

So nothing in the messages specific?

Muhammad Waheed. Yes, Waheed?

Sir, I just wanted to ask [Foreign Language]?

[Foreign Language], when the numbers come out, we'll have a look at that. So I don't want to discuss -- because we're discussing the 31st December numbers, so I don't want to give you any -- get into any further details. But of course, there will be a dip in the OCR reserves. Having said that, I think [Foreign Language] duration of our assets is much lower than what some other large banks have. So our impact on a relative basis might be a little less pronounced as compared to some of our larger peers. But it is a [indiscernible] think, [Foreign Language] policy being where and the yields are trending around 12, 12.5, so of course, there is that [indiscernible]. I hope that answers your question.

And sir, just following up, [Foreign Language].

I think Khurram sir has already mentioned this, and we feel that the down cycle is -- this is the end of the down cycle. A move here would be a move up. [Foreign Language], the pace and quantum of rate movements would definitely depend on how the Middle East crisis transpires. So quick solutions might mean these rates might be here for longer. However, I mean, too many moving parts, very difficult to get a handle on where rates would be in the, let's say, next 6 months or so. So I hope that answers your question.

So Mustafa, you're asking about our growth. As I said earlier also that we are more customer-centric than market-centric. There is [indiscernible] growth. So yes, we will increase -- in our balance sheet, you will find increase. But our strategy is more on customers. As our customers grow, our growth will be there. I've already said that branches growth is limited, but I think our retail bank is seeing a very good growth. So just to add to how our strategy [ base ] going forward is. That's why we don't see a lot of growth in the branches, primarily because we've got a lot of focus on our digital side and we're focused there. In addition to that, I think we have a very clear strategy in the client segments we want to target. So we see us as a midsized bank. We're also looking at actually value versus quantity. So we are not positioning ourselves as a mass market bank, and we're not going to be targeting every segment out there that most probably the major markets are doing. We are very focused on a few segments in the market where we feel the value is much higher, where we can service them much better with the branch network we have. We feel we have the right digital offerings to those segments. We feel we can grab much better market share from them versus trying to be a mass market bank, which plays on volumes. We want to be much more focused. And I think that's worked for us. Over the last 5, 6 years, we've seen that trajectory. And I think going forward, that would be the same. And like shown in the slide earlier, our major focus is, which we have strength is trade and commercial banking. And in the retail space, even we are very, very focused towards, again, linked kind of clientele, which is SME business owners and high net worth retail clients. And that's kind of our strategy in terms of growth. And we feel if we execute that well, we should have market-leading or minimum market-leading results and growth over the next 3 to 5 years. Any other question?

[Foreign Language].

If there's no other questions, then we conclude the session today. I thank you all for attending and asking the questions. So thank you very much.