Pakistan Bank_Risk mitigation continues; preference for large banks, (AKD Daily, Nov 11, 2020)
AKD Daily
Pakistan Bank: Risk mitigation continues; preference for large banks
- Loan quality continues to remain upbeat in the outgoing qtr, with total NPLs of our private banking universe (accounting for 59.4% of total industry advances) contracting 1.7%QoQ but marginally up 3.0%YoY to stand at PkR295.5bn, translating into an infection ratio of 6.1%.
- Charge ratio of our banking universe for 3QCY20 stands at 0.4% vs. 0.6% in the previous qtr, as banks continue to build loss buffers (PkR7.3bn provision booked in 3QCY20 over PkR15.2bn recorded in 2QCY20) but countered by higher recovery ratio (3QCY20: 1.3% vs. 1.0% in 2QCY20) as resumption of businesses and pick up in real estate activity played in bank’s favor.
- Status Quo is expected in risk mitigation strategies in the near term where banks remain on the cautious side, examining and re-examining their loan book as COVID second wave grapple the country. Recoveries could pickup benefitting from higher market activity in real estate sector.
- Currently underperforming the broader index by 16.5%, banking sector is in for a run where, i) cheaper valuations (CY21F P/B: 0.8x), ii) resumption of dividend payouts, and iii) potential re-rating as seen historically as economy enters recovery phase (banks rerated by 10-20% in CY13-14).
AKD Research
Habib Metropolitan Bank Limited is a Pakistan-based company, which is engaged in providing commercial banking, brokerage services and modaraba management services. The Company's segments include Trading and sales, Retail banking and Commercial banking. The Trading and sales segment undertakes the Company's treasury, money market and capital market activities. The Retail banking segment provides services to small borrowers, such as consumers, and small and medium enterprises (SMEs) and borrower's agriculture sector. It includes loans, deposits and other transactions with retail customers. The Commercial banking segment includes loans, deposits and other transactions with corporate customers, and SME customers other than those included in the Retail banking segment. The Company operates approximately 240 branches, including approximately 20 Islamic banking branches and approximately 40 sub branches in Pakistan. The Company is a subsidiary of Habib Bank AG Zurich.
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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