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BAFL_HMB & POL_Result Previews, (AKD Daily, Oct 19, 2020)

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BAFL, HMB & POL: Result Previews

BAFL to post 3QCY20 EPS of PkR1.47/sh: Bank Alfalah Limited (BAFL) is set to announce its 9MCY20 result on Oct 21, 2020 where we expect the bank to post an NPAT of PkR8.4bn (EPS: PkR4.72) vs. PkR9.5bn (EPS: PkR5.41) in the same period last year. Though, moratorium on dividends for BAFL has ended, we still expect the bank to skip payout in order to line up a big payout in 4QCY20. For 3QCY20, we expect the bank to post earnings of PkR1.47/sh, down 9.7/19.0% QoQ/YoY as highest exposure to advances (ADR:  63.7% as of 2QCY20) puts the bank in a tough spot with interest rate trend being reflected in advances yield. However, bank's PIB book (BAFL began accumulating PIBs in 2HCY19) could partially offset the impact on NIMs which are expected to stand at 3.8% in 3QCY20 vs. 4.8% in the previous quarter. Moreover, potentially lower cost of provisioning (3QCY20E: 0.41% vs. 2QCY20: 0.68%), recovering fee income (+42.6%QoQ) and continuation of capital gains (unrealized gains on investments stood at PkR9.5bn as of 2QCY20) could come in handy in arresting the decline in earnings.

HMB to post 9MCY20 earnings of PkR5.25/sh: Habib Metropolitan Bank Limited (HMB) is scheduled to announce its 9MCY20 result on Oct 22, 2020 where we expect the bank to post an EPS of PkR5.25 (NPAT of PkR5.7bn), +8.0%YoY. 3QCY20 NPAT is expected at PkR1.4bn (EPS: PkR1.29) vs. PkR2.5/1.8/sh in 2QCY20/3QCY19. Downtick in earnings despite high yielding PIB portfolio (Surplus as a % of Govt. securities stands at 3.1% — one of the highest in the industry) is attributable to sticky deposit cost base (Fixed deposits’ share in total deposits: 34.0% — highest in the industry) pressurizing core margins (down 1.4ppt QoQ). Contrary to the trend, bank's non-funded income recorded an uptick of 9.2%QoQ in 2QCY20 – a reflection of sustainability of bank's NFI – where we expect the trend to gain steam from normalization in trade activity with potential impetus provided by realization of gains on bonds (unrealized gains as of Jun'20 stood at PkR13.4bn). Lastly, we expect provisioning expense to normalize for 3QCY20 after the bank booked ~PkR800mn in general provision foreseeing risks from COVID-19 disruptions. 

POL; Erratic oil price environment makes QoQ growth certain: Pakistan Oilfields Limited will announce its 1QFY21 results on Oct 20, 2020 where we estimate the company to post cumulative unconsolidated earnings of PkR3.5bn (EPS: PkR12.25), in a period where crude benchmark averages moved lower by 10.5%YoY, but rose 43%QoQ. Sequential spike in profitability is expected from: 1) -32%YoY but +61%QoQ variations in oil prices keeping revenues high in the oil heavy (~45%/37% oil/gas revenue split for FY20) E&P firm, while an improved production profile (oil/gas production for 1QFY21 rising by ~25/~30%QoQ) keeping topline growth at ~7.3%YoY , 2) absence of devaluations while continued exchange losses (similar to levels seen in 1QFY20) continue to diminish the role of macro factors in covering for production declines and 3) lack of major exploration and production activity and no dry wells, keeping below the line costs stable. In line with its payout policy, no payout for 1QFY21 is expected.

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