Dutch Bangla Bank

  • TickerDUTCHBANGL
  • ISINBD0121DUBBL4
  • ExchangeDhaka Stock Exchange
  • SectorBanks
  • CountryBangladesh

Analysts

Feasibility Study Results in December to be a Catalyst for this Junior

Feasibility Study Results in December to be a Catalyst for this Junior

S.M Galibur Rahman

Bangladesh (IDLC): Dutch-Bangla Bank – significant margin improvement where others suffer; Hold on valuation

Bottom-line growth from interest income growth (driven by margin improvement), controlled opex and lower provisioning. Dutch Bangla reported consolidated NPAT of BDT1,449mn (EPS BDT2.9, 40.3% yoy) in Q3 19 compared to BDT1,033mn (EPS BDT 2.07) in Q3 18. In 9M 19, NPAT stood at BDT3,363mn (EPS BDT 6.73) against the previous year 9M NPAT of BDT2,658mn (26.5% yoy growth). This quarter’s consolidated earnings are 47% higher than our expectations. Higher operating income growth (22% yoy), controlled opex growth (12% yoy) and lower provisioning (70% yoy – de-growth) resulted in 40% yoy NPAT growth.

S.M Galibur Rahman

Bangladesh (IDLC): Banks – Liquidity conditions improve, our top pick is BRAC

Liquidity condition improves. Higher deposit growth (6.3% YTD June) compared to credit growth (5.4% YTD June) has improved banking sector liquidity. Deposit growth accelerated in Q2 (5.2% QoQ) compared to Q1 (1.1% QoQ). As a result, interest rate has started to decline. However, we are yet to see a noticeable decline in the interest rate due to the substantial increase in government borrowings. We expect the continuation of this money flow in the banking system followed by reform in NSC investment.

S.M Galibur Rahman

Bangladesh (IDLC): Banking sector – liquidity crunch prevails; we prefer BRAC Bank

On the back of the recent increase in non-performing loans outstanding, the sector’s systematic risk remains high. Relaxation in NPL classification and higher rescheduling activity coupled with existing low provisions coverage have increased the systematic risk further. However, low valuations (sector median 0.7x PB) suggest that this systematic risk is mostly priced in. We expect banks with better corporate governance practices and capital/funding advantages will gain higher market share and thus, improve their profitability.

Rahul Shah CFA ...
  • S.M Galibur Rahman

Bangladesh (IDLC): Banks – Asset quality issues shroud the promising story; we prefer BRAC Bank

We are cautious on the sector. On the back of the recent increase in non-performing loans outstanding, the sector’s systematic risk remains high. However, lower valuation (sector median 0.8x PB) suggests that this systematic risk is mostly priced in. Fundamentally, we expect moderate top-line growth and improved profitability for our coverage names. We use a dividend discount model to derive our target prices.

Feasibility Study Results in December to be a Catalyst for this Junior

Feasibility Study Results in December to be a Catalyst for this Junior