Pakistan Banks_Payouts propel ‘bull-cycle’ expectations, (AKD Daily, Jan 20, 2021)
AKD Daily
Pakistan Banks: Payouts propel ‘bull-cycle’ expectations
- The strong rally in UBL (+10.6%CYTD) can be taken as an indicator of long-awaited structural bull phase in the banking sector likely triggered by dividend payout expectation (c. DY of latest payouts stand at 6.0%) and receding foreign positions (net sell CY20/cumulative since CY14: US$162mn/US$603.1mn).
- We expect interest to prevail in near term as valuations (CY21F P/B of 0.8x, at a discount of 13.0% to historical multiples) take center stage and expectation of interest rate hikes (AKD Est. Dec’21-end interest rate of 8.5%) gain ground resulting in possible multiple re-rating as seen in CY17-18 (sector re-rated by 12.7%).
- With modest expectation of interest rate hikes in CY21, onus lies on earning asset growth (CY20-23F CAGR: 15.0%) and non-funded income to drive earnings forward whereas normalization in administrative costs would exclusively favor HBL’s earnings growth (C/I: 60.3% avg. CY21-23F vs. +70% in previous 3y).
- We continue to like HBL (TP: PkR177/sh—on valuations, strong earnings profile), MCB (TP: PkR223.4/sh — earnings profile, prudent buildup of PIB book with 4.1% unrealized gains on PIB holdings vs. 1.5% of our universe), and BAHL in mid tier (TP: PkR91.5/sh — on aggressive branch deployment).
AKD Research
Habib Bank Limited is engaged in commercial banking and asset management related services in Pakistan and overseas. The Bank's segments include Branch Banking, which consists of loans, deposits and other banking services to agriculture, consumer, small and medium-sized enterprise (SME), and commercial customers; Corporate Banking, which consists of lending for project finance, trade finance and working capital to corporate customers and it also provides investment banking services, including services provided in connection with mergers and acquisitions; Treasury, which consists of trading, fixed income, equity, derivatives and foreign exchange businesses, and it also includes credit, lending and funding activities with professional market counterparties; International Banking, which is engaged in monitoring and reporting purposes and consists of its operations outside of Pakistan, and Head Office/Others. It operates in Pakistan; Europe, Middle East and America, and Asia and Africa.
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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