BAFL_MEBL & BAHL_1HCY20 Result Previews, (AKD Daily, Aug 10, 2020)
AKD Daily
BAFL, MEBL & BAHL: 1HCY20 Result Previews
BAFL — Limited repricing gains to keep 2QCY20 earnings at PkR1.87/sh, flat YoY: Previewing 2QCY20 result for Bank Alfalah Limited (BAFL), we expect NPAT to arrive at PkR3.3bn (EPS: PkR1.87), +14.2%QoQ flat YoY. The sequential jump in earnings is attributable to potentially higher NFI (+16.5%QoQ) contributed by FX income and Capital Gains. Repricing gains would be limited in the case of BAFL, in our view given, i) higher exposure to mid-market segments (prone to earlier repricing to roll-out relief), ii) higher composition of CA in the mix (45.5% of total deposits), and iii) leveraged growth. As a result, we expect NII to remain flat on a QoQ basis. Earnings growth is further arrested as we conservatively incorporate higher credit costs (0.27% for 2QCY20 vis-à-vis 0.16% for 1QCY20). 1HCY20 earnings consequently are expected to stand at PkR6.2bn (EPS: PkR3.49) vs. PkR6.5bn (EPS: PkR3.63).
MEBL 2QCY20 EPS expected at PkR4.4/sh, driven by NII growth of 15.5%QoQ: Meezan Bank Limited (MEBL) is due to release its 1HCY20 results on Aug 17’20 where we expect the bank to post earnings of PkR10.7bn (EPS: PkR8.32) as compared to PkR6.9bn (EPS: PkR5.38) in 1HCY19. Earnings for 2QCY20 are expected to clock in at PkR4.4/sh as against PkR3.9/sh in the previous quarter and PkR3.1/sh same period last year. While the sharp cut in interest rates do play to bank’s advantage (2QCY20 NIMs: 6.5% vs. 6.1% in the previous quarter), volumetric growth in assets driven by Power/Ijarah Sukuk should mainly pull up NII by 15.5/45.7% QoQ/YoY. NFI, on the other hand, should continue losing its share in total income (2QCY20: 13.4% - lowest in the past 5Qs) in the backdrop of suppressed fee income though surprise on capital gains cannot be ruled out. Provisions are expected to be on higher side (PkR2.1bn in 2QCY20 vs. PkR1.1bn in 1QCY20) given risk conservative approach of the bank while capitalizing on temporary surge in core income.
BAHL 2QCY20 earnings to clock in at PkR4.2/sh driven by repricing gains: Bank ALHabib Limited’s (BAHL) BoD is scheduled to announce 1HCY20 results on Aug 17’20. We expect BAHL to report an NPAT of PkR7.5bn (EPS: PkR6.8) in 1HCY20 vis-à-vis PKR4.4bn (EPS: PkR4.0) in the same period last year. On a quarterly basis, earnings are likely to grow by 64.5/95.3% QoQ/YoY to PkR4.7bn (EPS: PkR4.2) in 2QCY20 driven largely by, i) repricing gains (2QCY20 NIMs: 5.2% vs. 4.0/4.3% in 1QCY20/2QCY19), and ii) aggressive branch expansion yielding results (Avg. deposit growth: 13.4% vs. 11.0% of the industry in 6MCY20). Benefitting from NII growth of 30.6%, admin cost to income ratio is likely to fall to 49.5% vs. avg. 59.3% in the past 9Qs. As with other mid tiers, provisions have been incorporated on the higher side at PkR1.1bn in 2QCY20 (looking at bank’s tendency to utilize higher earnings to enhance loss reserve) vs. PkR0.3bn in the previous quarter.
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Meezan Bank Limited is an Islamic commercial bank. The Bank is engaged in corporate, commercial, consumer, investment and retail banking activities. It offers a range of Islamic banking products and services through a retail banking network of over 550 branches in approximately 140 cities to its corporate, commercial and small and medium-sized enterprise (SME) customers based on their financial requirements. It provides personal banking, business banking, premium banking and branchless banking. The Bank also offers Meezan Rupee Current Account, Karobari Munafa Account, Meezan Rupee Savings Account, Meezan Business Plus Account, Meezan Bachat Account, Meezan Kids Club Account, Meezan Teens Club Account, Meezan Asaan Current Account, Meezan Kafalah, Certificates of Islamic Investment, Meezan Amdan Certificate and Dollar Mudarabah Certificate. It has assets in agriculture, food, forestry and fishing; cement, and others. The Bank operates only in Pakistan.
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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