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BAFL_Price decline makes yield attractive, (AKD Daily, Jul 9, 2020)

AKD Daily

BAFL: Price decline makes yield attractive

  • Bank Alfalah Limited’s (BAFL) stock price receded by 28.7% in the past 6M matching downward revisions in the bank’s one-year fwd TP to PkR38.0/sh as against PkR48.9/sh previously. In turn, this softening has raised the lure of  attractive dividend yield on offer (8.7/8.7% for CY20/21).
  • Revisions were prompted by weakened earnings outlook given, i) higher sensitivity to interest rates amongst conventional peers (Mar’20: 1.21x vs. avg. 1.02x of our conventional banking universe), and ii) late cycle growth push (50 branches added over the past 1Y, IT related expenses up +22.6%YoY) could prop up admin costs in the medium term.
  • Given the riskier lending book, we have incorporated 0.8/0.8/0.2% cost of provisioning for CY20/21/22F however, i) active management of risks, and ii) authorities focused on bailing out vulnerable sectors/segments, could keep a lid on costs.
  • Repricing gains and realization of surplus on bonds are the two factors likely governing earnings in 2QCY20. We expect bank’s earnings to clock in at PkR1.82/sh, +11.9/-ve 1.1% QoQ/YoY culminating into a 1HCY20 NPAT of PkR6.1bn (EPS: PkR3.4) vs. NPAT of PkR6.5bn (EPS: PkR3.6) in the same period last year.

AKD Research

Underlying
Bank Alfalah

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.

Provider
AKD Securities Limited
AKD Securities Limited

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.

Analysts
Hamza Kamal

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