Shares near PKR 330 as investors reward five-year turnaround in Pakistan’s largest bank
Karachi — Habib Bank Limited shares are trading at PKR 326, near their 52-week high and above book value for the first time in over three years, marking a sentiment shift for Pakistan’s largest lender as investors bet the bank can sustain mid-teens returns on equity despite persistent macro headwinds.
The stock’s price-to-book ratio of 1.16x—calculated against the bank’s reported book value of PKR 280.1 per share at December 31, 2024—represents a sharp reversal from the deep discounts that prevailed through 2022-2024, when HBL traded as low as 0.7x book amid currency volatility and inflation concerns.
“The market is finally giving HBL credit for what’s been a quiet transformation,” said a Karachi-based banking analyst who covers the stock. “They’ve doubled return on equity, cut their cost-to-income ratio by 17 percentage points, and cleaned up the loan book—all while most investors were focused on macro noise.”
Five-Year Fundamental Transformation
The re-rating follows a dramatic improvement across every major financial metric. HBL’s consolidated performance over 2019-2024 reveals systematic execution that few Pakistani corporates have matched.
Income Statement Performance
| Metric (PKR millions) | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 5-Yr CAGR |
|---|---|---|---|---|---|---|---|
| Total Revenue | 125,485 | 160,699 | 167,730 | 212,294 | 299,584 | 342,134 | 22.2% |
| Profit After Tax | 15,500 | 30,913 | 35,507 | 34,398 | 57,757 | 57,805 | 30.1% |
| EPS (PKR) | 10.5 | 21.1 | 23.9 | 23.2 | 39.3 | 39.9 | 30.6% |
Revenue growth tells the story: total income nearly tripled from PKR 125.5 billion to PKR 342.1 billion, delivering a compound annual growth rate of 22.2%. More importantly, profit growth outpaced revenue expansion at 30.1% CAGR, signaling genuine operating leverage rather than just top-line inflation.
Earnings per share jumped from PKR 10.50 to PKR 39.90—a near-quadrupling that reflects both profit growth and disciplined capital management. The bank maintained relatively stable share count while growing the equity base through retained earnings.
Profitability & Efficiency Metrics
| Metric | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | Change |
|---|---|---|---|---|---|---|---|
| ROE (%) | 8.1 | 15.8 | 16.3 | 12.4 | 18.5 | 16.7 | +8.6pp |
| ROA (%) | 0.5 | 1.1 | 1.0 | 0.7 | 1.1 | 1.0 | +0.5pp |
| Cost/Income (%) | 73.5 | 62.5 | 63.1 | 59.9 | 56.8 | 56.3 | -17.2pp |
| NFI/Revenue (%) | 21.0 | 24.8 | 26.4 | 27.1 | 27.8 | 28.2 | +7.2pp |
Return on equity climbed from 8.1% in 2019 to a peak of 18.5% in 2023, moderating to a still-robust 16.7% in 2024. This places HBL firmly in the mid-teens ROE range that justifies premium valuations—provided it can be sustained.
The cost efficiency story is equally compelling. HBL’s cost-to-income ratio fell from 73.5% to 56.3%, approaching global banking standards. For a bank operating over 1,700 branches across Pakistan and international markets, that 17-percentage-point improvement required systemic overhaul of operations and technology infrastructure.
Non-funded income diversification deserves attention: fee-based revenue now represents 28.2% of gross revenue, up from 21% five years ago. This shift reduces dependence on volatile net interest margins and creates more recurring, capital-light earnings streams.
Balance Sheet & Asset Quality
| Metric (PKR billions) | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | Growth |
|---|---|---|---|---|---|---|---|
| Total Assets | 3,230 | 3,639 | 4,236 | 5,144 | 5,492 | 6,060 | 87.6% |
| Gross Advances | 1,374 | 1,521 | 1,876 | 2,198 | 2,284 | 2,435 | 77.2% |
| Deposits | 2,620 | 2,873 | 3,365 | 4,040 | 4,242 | 4,370 | 66.8% |
| Total Equity | 214 | 233 | 262 | 313 | 349 | 411 | 91.6% |
| NPL Ratio (%) | 6.6 | 7.1 | 6.3 | 5.0 | 4.6 | 4.3 | -2.3pp |
| Coverage Ratio (%) | 98.4 | 96.2 | 99.8 | 113.7 | 119.8 | 123.2 | +24.8pp |
The balance sheet scale doubled, with total assets reaching PKR 6.06 trillion. More critically, asset quality improved dramatically: non-performing loans as a percentage of gross advances declined from 6.6% to 4.3%, while total provision coverage strengthened to 123.2%—among the strongest buffers in Pakistan’s banking sector.
HBL’s advances-to-deposits ratio of 55.7% leaves significant capacity for loan growth without straining liquidity—a key consideration given Pakistan’s volatile funding environment. The bank’s deposit base of PKR 4.37 trillion provides stable, low-cost funding that competitors struggle to match.
Capital Strength (Basel III)
| Ratio | 2023 | 2024 | Regulatory Minimum |
|---|---|---|---|
| CET-1 | 13.1% | 13.5% | 6.0% |
| Tier-1 | 13.9% | 14.3% | 7.5% |
| Total Capital | 17.4% | 17.7% | 11.5% |
Capital ratios remained well above regulatory minimums throughout the five-year period. Common Equity Tier 1 at 13.5% and total capital at 17.7% provide substantial cushion against potential credit shocks—essential for a bank operating in Pakistan’s volatile macro environment.
Valuation: Premium or Fair Value?
At PKR 326, HBL trades at approximately 6.9x trailing twelve-month earnings and 1.16x book value. The valuation metrics tell a nuanced story.
Current Valuation Snapshot
| Metric | Value | Interpretation |
|---|---|---|
| Market Price | PKR 326 | Near 52-week high (329.9) |
| Trailing P/E | 6.9x | Below historical average |
| Price/Book | 1.16x | First time >1.0x since 2021 |
| Book Value/Share | PKR 280.1 | As of Dec 31, 2024 |
| Dividend Yield | ~4.9% | Based on 40% payout ratio |
The 6.9x P/E appears compressed by global standards but reflects Pakistan’s country risk premium. More relevant for banks is the price-to-book ratio: at 1.16x, the market is pricing in sustained ROE above cost of equity—a premium that requires execution to justify.
A residual income model suggests that with ROE of 16.7%, cost of equity around 14%, and 60% earnings retention, HBL should trade above book value. However, the margin of safety has narrowed considerably from the deep discounts available 18 months ago.
Technical Analysis: Momentum Meets Resistance
HBL’s price action over the past year reveals a stock breaking out of a multi-year consolidation, with technical indicators confirming bullish momentum.
Key Technical Levels
| Level Type | Price (PKR) | Significance |
|---|---|---|
| 52-Week High | 329.9 | Immediate resistance |
| Current Price | 326.0 | Near yearly highs |
| Breakout Zone | 312-320 | Recent consolidation top |
| Primary Support | 280-300 | High volume node / Book value |
| Strong Support | 240-260 | Major accumulation zone |
| 52-Week Low | 198.5 | Distant support |
Technical Indicators (Daily)
| Indicator | Reading | Signal |
|---|---|---|
| RSI (14) | 65 | Bullish, not overbought |
| MACD | Positive crossover | Buy signal |
| 50-Day MA | PKR 295 | Price above (bullish) |
| 200-Day MA | PKR 268 | Price above (bullish) |
| Volume Trend | Rising on advances | Confirms momentum |
The stock broke through resistance at PKR 312-320 on rising volume earlier this month—a zone that had capped prices since mid-2024. This breakout on strong volume suggests institutional accumulation rather than retail speculation.
The next meaningful resistance appears near PKR 360, a psychological level that aligns with thin liquidity zones. Strong support has been established around PKR 280-300, roughly aligned with book value and a high-volume trading zone from 2023-2024.
Technical momentum indicators show bullish sentiment without extreme overbought conditions. The 14-period RSI at 65 suggests room to run before hitting typical overbought thresholds above 70. MACD remains in positive territory with the signal line trending upward.
However, thin liquidity above PKR 330 means price moves could be sharp in either direction. The weekly chart shows HBL making higher highs and higher lows since bottoming in late 2023—a textbook uptrend structure.
Risk Factors That Could Derail the Rally
The bullish case assumes macro stability that Pakistan hasn’t consistently delivered. Currency volatility remains the primary threat: sharp rupee depreciation would increase funding costs and potentially trigger credit deterioration in dollar-linked corporate exposures.
Rising interest rates could compress margins if deposit costs increase faster than asset yields. While HBL’s provision coverage is strong, a sector-specific shock—particularly in real estate or commodities—could force additional provisioning that dents earnings.
Regulatory risk persists. Pakistan’s banking sector faces evolving capital requirements and potential changes to taxation or branch licensing rules. Any surprise regulatory burden would pressure margins and potentially require capital raises.
Political instability, always a wild card in Pakistan, could trigger deposit flight or credit freezes that stress even well-capitalized banks. HBL’s size makes it systemically important but also more exposed to sovereign risk.
The Verdict: Quality at a Price
At 1.16x book value, HBL investors are no longer buying distress. They’re paying for quality—betting that Pakistan’s largest bank has earned a premium to tangible equity through years of operational improvement.
The fundamentals support the re-rating: ROE in the mid-teens, improving asset quality, strong capital buffers, and revenue diversification all justify a price above book value. The technical picture confirms institutional interest, with momentum indicators aligned bullishly.
But the margin of safety has narrowed. The deep discounts available in 2023 are gone. Current pricing assumes HBL can sustain mid-teens returns through Pakistan’s next macro challenge—whenever it arrives.
For investors, the question isn’t whether HBL has executed well—the five-year track record proves it has. The question is whether paying 1.16x book leaves enough cushion if Pakistan’s macro trajectory disappoints. At current levels, the market is choosing optimism. Whether that optimism proves durable depends less on HBL’s management and more on factors beyond any bank’s control.