BAFL: Getting into big leagues! (AKD Daily, Aug 29, 2019)
- Bank Alfalah Limited (BAFL) reported 1HCY19 NPAT of PkR6.5bn (EPS: PkR3.63) vs. PkR6.2bn (EPS: PkR3.48) in the corresponding period last year. On a quarterly basis, 2QCY19 NPAT clocked in at PkR3.3bn (EPS: PkR1.84, +2.6%QoQ/12.1%YoY).
- We update our investment case for Bank Alfalah Limited (BAFL) post release of 1HCY19 financial results, increasing our risk free rate assumption and rolling over our target price to Dec’20, our revise TP stands at PkR51.3/sh (previous: PkR50.9/sh).
- The stock is currently trading at a CY20F P/B of 0.7x after having returned 2.0% (Banking sector: -ve 13.3%) during CY19TD with investors giving salute to, i) potential improvement in ROE to 17.6% in CY20 vs. 15.3% in CY18 – that can possibly remove bank’s discount relative to Big-5 (16.0% CY10-17 on ROE per unit of P/B), and ii) stronger than expected dividend payout of PkR2/sh in 1HCY19.
- CY12-18 Loan CAGR of 13.8% vs. industry’s CAGR of 11.5%, together with higher yield of 3MKIBOR+1.25% vs. Big 5’s yield of 0.2-0.6% and constant accumulation of CA deposits (1HCY19: 49.6%, management expects long-term CA in the deposit mix at 45%) should carry NIMs to 5.63/5.67% in CY20/21F.
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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