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ABL_NBP & BOP_1HCY20 Result Previews, (AKD Daily, Aug 18, 2020)

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ABL, NBP & BOP: 1HCY20 Result Previews

ABL 2QCY20 earnings expected at PkR4.2/sh: Allied Bank Limited (ABL) is set to announce its 2QCY20 results where we expect the bank to report an earnings of PkR4.2/sh, +23.5/52.7% QoQ/YoY. Net Interest Income (NII) is likely to be up 13.0/43.4% QoQ/YoY driven by repricing gains (advances to interest bearing liabilities: 69.1% in line with our banking universe) however, tamed due to increase in Minimum Deposit Rate (+0.5%, SA occupies 42.7% share in deposits). Non Funded income, on the other hand, is expected to remain flat QoQ where depressed fee income (down 16.8%, given higher dependency on branch banking fees) could be negated by higher FX income. Growth in core income is expected to be partially negated by higher administrative costs (+13.0%QoQ/12.0%YoY) as seen historically in 2Qs. Provisioning costs are expected to remain muted given bank’s conservative lending policy. 1HCY20 NPAT is expected at PkR8.7bn (EPS: PkR7.60) vs. PkR6.2bn (EPS: PkR5.45) in the same period last year.

NBP earnings estimated at PkR4.6/sh for 1HCY20; dented by higher provisioning expectation: Previewing National Bank of Pakistan’s (NBP) 1HCY20 results, we expect NPAT at PkR9.8bn (EPS: PkR4.6) vs. PkR11.4bn (EPS: PkR5.3) in the same period last year. Potentially higher provisioning costs dents earnings outlook for the bank in 1HCY20. 2QCY20 earnings are expected at PkR2.63/sh, +36.3%QoQ but down 20.6%YoY. The sequential growth in earnings comes at the back of favorable repricing factor (NII +25.0%QoQ) and PIB accumulation at higher yields (PIB/deposit: 23.4%) coming into play. Furthermore, we expect strong contribution from Non-funded Income (NFI) driven by FX income and capital gains where fee income is likely to remain flat. Strong delivery in total income is likely to be partially negated by seasonally administrative costs and provisioning expense (cost of provisioning is estimated at 0.6% in 2QCY20 vs. 0.3% in the previous quarter). The management of the bank in recent times has been strategizing on cleaning lending book of the bank, capitalizing on core income growth.

BOP earnings likely to clock in at PkR1.44/sh in 1HCY20: Previewing The Bank of Punjab’s (BOP) earnings for 1HCY20, we expect earnings at PkR1.44/sh vis-à-vis PkR1.47/sh in the same period last year. 2QCY20 NPAT is expected at PkR2.3bn (EPS: PkR0.88), +57.7/15.0% QoQ/YoY potentially driven by repricing gains (SA occupies 47.4% in total deposits) and investment in PIBs at higher yields (PIB/deposits at 31.0% - highest in our universe). Consequently NII of the bank is expected to jump 48.2%QoQ/32.5%YoY and overshadowing the decline in Non-funded income of the bank (down 20.6%QoQ but still up 54.3%YoY courtesy capital gains). We do not rule bank continuing with capital gain realization on bonds in 2QCY20 (unrealized gains as of Mar’20 stood at PkR9.35bn or PkR2.16/sh post tax). We have conservatively assumed higher credit costs for the 2QCY20 at 0.5% vs. 0.2% in the previous quarter.

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