Pakistan Banks_Deposit growth could be an uphill battle, (AKD Daily Jul 11, 2019)
- FY19 closed with total deposits of the banking industry standing at PkR14.4trn, +10.7%YoY vs. 9.0%YoY recorded in the previous year. Deposits surged by PkR961bn (+~5% of money supply) during the last days of Jun’19 that could be attributed to asset declaration scheme but FY-end phenomenon also likely played its part.
- We expect relatively slow single digit growth of 9.1% (CAGR) in deposits over CY19-21F vs. 12.8% in CY15-18 owing to, i) higher interest rates potentially impacting money supply , and ii) gov’t restricting its borrowings from the central bank.
- Within our Banking universe, the big-5 can leverage their wide branch network to maintain deposit growth, where amongst mid-tiers, MEBL and BAHL look to realize higher deposit growth due to recent aggressive branch expansion while BAFL’s consolidation efforts could dent its deposit growth.
- High interest rate environment is yet to reflect on deposit composition of our banking universe (1QCY19 CASA has remained stable at 78.7% vs. 78.6% in Dec’18) where we expect CASA to drop 2-6ppts. going forward across our universe considering i) banks doing-away with ‘selected deposit’ strategy, and ii) potential switching from Saving Accounts (SA) towards Fixed Deposits (FD) in a high interest rate environment.
- From an investment perspective, while valuations our enticing (CY19F P/B: 1.05x) we continue to advocate for at least 2y investment horizon and balancing risk with returns where our liking is weighted towards MCB (TP: 224.7/sh) and MEBL (TP: 115.8/sh).
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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