BAFL: From strength to strength , (AKD Daily, Sep 10, 2020)
AKD Daily
BAFL: From strength to strength
- We update our case for Bank Alfalah Limited (BAFL) post 1HCY20 result announcement , we revise our earnings slightly over the medium run as bank moves to preempt potential credit costs (~PkR2bn general provision booked in 2QCY20), laid-back branch expansion plans (CY20 target 34 branches vs. +70 previously) and potentially softens deposit mix in favor of interest bearing deposits to push volumetric growth.
- BAFL’s PIB book (fixed rate PIBs to deposit ratio: 8.0%, most of the PIBs have been accumulated in 3QCY19) would not only provide cushion to net interest income (CY21/22: -5.1/2.6%) as asset yields reprice but also provides space for bank’s expansion initiatives (admin cost 3Y CAGR: 7.3%), necessary for long term NII growth.
- Our revised TP stands at PkR40.6/sh (previously: PkR38.0/sh) - rolled over to Dec’21. Though the stock offers limited capital upside at current valuations, dividend yield of 11.3% stretches total return to 26.3%
- BAFL reported 1HCY20 NPAT of PkR5.7bn (EPS: PkR3.25) vs. PkR6.3bn (EPS: PkR3.56) in the same period last year. Quarterly trend depicts stable picture where 2QCY20 earnings came in at PkR1.62/sh, stable QoQ but marginally down 8.5%YoY.
AKD Research
Bank Alfalah Limited is a holding company. The Company's segments include Retail banking, including loans, deposits, trading activity, wealth management and other banking transactions with its retail and middle market customers; Corporate banking, which includes loans, deposits, project financing, trade financing, investment banking and other banking activities with its corporate and public sector customers; Treasury, including liquidity management activities carried out through borrowing, lending and money market operations; Consumer banking, including constitutes consumer financing activities with individual customers; Islamic banking, pertaining to its full scale Islamic Banking operations; International operations, which includes amounts related to its overseas operations, namely, commercial banking activities in Bangladesh and Afghanistan, and wholesale banking activities in the Kingdom of Bahrain, and Others, including merchant banking related activities.
AKD Securities Ltd. is one of the leading securities firm in Pakistan, providing a comprehensive range of investor focused services, including equity brokerage, economic and securities research, investment banking and financial advisory services. AKD Securities accounts for more than 6% of the average daily value of the Karachi Stock Exchange. AKD Securities was the first brokerage house to launch an online trading platform in Pakistan in November 2002 and now has the largest market share with over 6000 customers. This has helped diversify and expand the retail investor base in the country and ushered in a whole new universe of investors to the stock market.
AKD Securities Ltd. caters to a diversified group of domestic and international institutional investors, high net worth individuals and upscale retail clients, including expatriate Pakistanis. With high quality research, unparalleled execution and distribution capability for both regular and large block trades, AKD Securities Ltd. has earned an outstanding reputation in the Pakistani securities industry.Outside of commercial banks, AKD Securities Ltd. is one of the biggest capital market firms in the country. AKD Securities is the leader in raising and providing risk capital in underwriting, market making and mergers and acquisitions in Pakistan. Good corporate governance and professionalism are emphasized throughout the firm and AKD Securities Ltd. is amongst the very few companies to have introduced a firm-wide comprehensive CODE of ETHICS, overseen by an independent compliance manager.Ultimately, our success is based on the quality of service we provide to our customers and the trust and confidence reposed in us by them. Our focus, therefore, remains on customer satisfaction at all levels in the company.
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