Pakistan Banks_Double digit loan growth is encouraging
The latest banking sector data indicates that banks' balance sheet continues to grow in double digits (up 15%YoY in Sep'17). While the sector continues to retain its preference for government securities (IDR at 68%), we have seen an encouraging 20.6% YoY uptick in advances in Sep'17. In this regard, private credit off-take has improved significantly with noticeable growth in consumer (+19.5%YoY) and SME (+12.2%YoY) segments. Despite increasing exposure in these segments, asset quality continues to improve with overall infection ratio coming down to 9.3% in Sep'17 vs. 11.3% in Sep'16 and coverage improving to 85%. While spreads have stagnated at 4.90% in Nov'17, we expect gradual improvement in CY18 as interest rate cycle reverses (AKD estimates 50bps increase in TR in CY18F). In this backdrop, we retain our liking for those names in the banking space that have: 1) the room to benefit from loan growth without compromising on the capital adequacy ratio, 2) growing proportion of CA deposits and 2) diversification through strong non-interest income. Our preferred plays include UBL, BAFL and MCB.
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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