KARACHI: The penalty of $225 million that the US regulator recently imposed on Habib Bank Ltd (HBL) eroded its net profit for January-September by 94 per cent on a year-on-year basis.

Net profit of HBL for the nine-month period amounted to Rs1.6 billion against Rs25.6bn a year ago.

“HBL’s consolidated profit after tax for the nine months ending on Sept 30 reduced to Rs1.6bn as a result of the $225m settlement payment made to the New York State Department of Financial Services (DFS),” said an official press release on Friday.

The loss after tax in the third quarter of the current calendar year was Rs14.224bn.

The fine, largest-ever imposed on a Pakistani bank by the US regulators, was considerably lower than the expected penalty of up to $630m. The bank earned a profit of $327m in 2016.

The bank has already surrendered its licence to operate a branch in New York. Its New York branch had been operational since 1978.

HBL became the target of an enforcement action by the DFS for 53 separate violations allegedly committed between 2007 and 2017.

The US regulator said that it would press on with its investigation, with an expanded “look-back”, which refers to a detailed examination of all foreign transactions covering periods from Oct 1, 2013 through Sept 30, 2014 and April 1, 2015 through July 31, 2017.

In 2015, the New York branch processed correspondent banking transactions totalling $287bn.

HBL said that excluding the impact of the settlement payment, its consolidated profit after tax for the nine-month period is Rs25.3bn while the pre-tax profit is Rs42.5bn, both 2pc lower on an annual basis.

HBL’s deposits grew to Rs2 trillion while the bank’s market share increased to 14.4pc. Its net domestic advances increased 14pc since December 2016 and total net advances amounted to Rs847bn.

The board did not declare an interim cash dividend for the quarter ending on Sept 30. HBL has already declared and paid interim cash dividends of Rs7 per share for the first two quarters of 2017.

“HBL’s board and management have taken serious note of the control and compliance issues. The board and the bank are committed to pursuing the highest standards of governance and have taken steps of structural changes and necessary remediation measures to ensure that HBL moves swiftly to bring these to a closure,” said the bank.

Published in Dawn, October 21st, 2017