Pakistan Banks_Banks poised to make a decent rally, (AKD Daily, Oct 08, 2021)
AKD Daily
Pakistan Banks: Banks poised to make a decent rally
- Since SBP raised DR by 25bps in the last MPS, yields on various on the run T-bills have gone up by 25bps—28bps pointing to the burgeoning expectations of another DR hike before CY21.
- The expectations of further hikes in interest rates have built up at a time when average book growth for local banks has been reported at 22%, one of the strongest in history.
- With headline growth in GDP likely to touch 5% mark in FY22, there is no immediate risk over buildup in NPLs in the short to medium term. Also, with average coverage ratio of our banking universe close to 98%, the provisioning costs are forecasted to remain low in the medium run.
- GoP lately made an amendment in the Finance Act, penalizing banks with lower ADR by levying higher tax rates on their income. While this is expected to push banks into growing their loan books, it could also potentially slow down deposit growth with greater emphasis put on cheap deposits.
- Despite a robust growth in profitability (AKD banking universe profitability up by 17%) and healthy dividend payouts, banking sector has underperformed the index by 2%CYTD. As a result of this underperformance, the valuations have opened up further and the average P/B of the sector is standing at 0.55x. Our top picks from banking universe are MEBL and MCB, offering total returns of 44% and 60% respectively.
AKD Research
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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