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HBL & MCB_CY20 Result Previews, (AKD Daily, Feb 08, 2021)

AKD Daily

HBL & MCB_CY20 Result Previews

HBL – CY20 EPS estimated at PkR22.6/sh: We expect Habib Bank Limited (HBL) to showcase  earnings of PkR33.4bn (EPS: PkR22.6) for CY20 vis-à-vis PkR15.5bn (EPS: PkR10.4) in CY19. Together with the results, we expect the bank to announce dividend of PkR4.75/sh (c. PkR6.0/sh) while upside cannot be ruled out given bank’s CET-1 capital standing at 12.88%. For 4QCY20, we expect earnings to clock in at PkR5.4/sh, down 19.3%QoQ while +22.0%YoY. Sequential decline in earnings is attributable to 87bps contraction in NIMs due to normalization in yields particularly of floating rate bonds and treasury bills. To highlight unrealized gains on PIBs and treasury bills, categorized as AFS, declined sequentially by 33.7% and 61.1% respectively, in 3QCY20. However, the decline in net interest income (down 12.8%QoQ) is partially offset by 30.5%QoQ growth in non funded income primarily led by seasonally higher fee income and potential capital gains (c. unrealized gain on investments stood at PkR19.2bn as of Sep’20). We expect the bank to continue boosting its loss reserves in case of potential credit risks and as such cost of provisioning is assumed at 0.24% for 4QCY20, marginally lower than in the previous quarter. We have a buy stance on HBL with a Dec’21TP of PkR174.6/sh.

MCB to post earnings of PkR6.21/sh in 4QCY20: MCB is scheduled to announce its full year CY20 results on 10th Feb 2021 where we expect full year earnings to clock in at PkR30.9bn (EPS: PkR25.9) compared to PkR23.9bn (EPS: PkR20.1) in the same period last year. We also expect MCB to resume its payout with PkR15/sh dividend, taking cumulative dividend to PKR20/sh. For 4QCY20, MCB is likely to record post an EPS of PkR6.21, down 26.1%QoQ/5.1%YoY where sequential decline is attributable to normalization in NIMs (4QCY20E: 4.8% vs. 5.7% in the previous quarter) where hefty maturity of Tbills in earlier part of the quarter led to rollover at lower yields. Non-markup income is expected to record a modest increase of 2.6%QoQ  as a result of recovery in fee income and potential capital gains (unrealized gains on investments stood at PkR16.6bn as of Sep’20). From provisioning perspective, we expect cost of provisioning at 0.2% in 4QCY20 compared to 0.3% in the previous quarter where the bank booked majority of risk related charge in the 2QCY20. We have a buy stance on MCB with Dec’21TP of PkR223.4/sh. 

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