Pakistan Banks: Moving past the trough
Pakistan Banks: Moving past the trough
The banking sector has shed 26%CYTD underperforming the market by 12% in the process. Alongside weak fundamentals, we attribute this poor price performance to the following factors: (i) legal and regulatory impediments (HBL, NBP), (ii) C-level management changes at various banks and (iii) non-materialization of MSCI related inflows (FIPI net outflow of US$26mn in banks since Jun'17). That said, the sector should gain traction going forward led by a probable interest rate reversal and higher loan growth. To this end, advances for the sector are up 12.5%YoY to PkR6.2tn while private sector credit offtake has also picked up pace considerably, growing by 21.9%YoY in Sep'17. Regarding the latter, while conventional heavy borrowers (Textiles and Food sector) topped the list of sectors attracting the most credit, we see a promising 48%YoY uptick in borrowings by the Construction sector. This we believe, is largely driven by CPEC with players gearing up for higher infrastructure development (e.g. expansions totaling 26.9mtpa in the Cement listed space). In this backdrop, we see banks posting growth in CY18F, albeit at a slower clip with the rebound becoming more visible in CY19F. Amongst our coverage cluster, specific focus should be on banks with an aggressive push towards: 1) a growing proportion of current account deposits, 2) a strong non-interest income profile, 3) ability and reach to capture CPEC led growth, and 4) adequate CAR buffers. In this backdrop, we prefer MCB (TP: 232.5, upside: 14%), UBL (TP: PkR250.1/sh, upside:46%) and BAFL (TP:48.1, upside: 20%).
Muslim Commercial Bank, and its subsidiaries, are engaged in commercial banking and the floating, administration and management of modaraba companies, modaraba funds and modarabas.
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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