Pakistan Bank_Aug20 Spreads falling below 5% mark, (AKD Daily, Sep 29, 2020)
AKD Daily
Pakistan Banks: Aug20 Spreads falling below 5% mark
- Banking sector spreads for Aug’20 stood at 4.88% - falling below 5.0% mark for the first time after 23Ms, taking 3Q’TD avg. spread to 4.94% vs. 5.53/5.42% in 2QCY20/1QCY20. Fresh spreads witnessed a marginal uptick on a sequential basis in Aug’20, +35bps to 4.42%. Consequently, 8MCY20 avg. spread stands at 5.34% vs. 5.68% in the same period last year.
- Complete reflection of interest rates on asset yield would come in the current month (Sep’20) further shrinking the spreads, in our view. However, some solace can be gained from repricing of fixed deposits in the near term.
- Investment book of banks have again gained prominence in determining the extent of impact of spreads shrinkage on Net Interest Margins where we believe MCB and BOP to have played the cycle well with unrealized gains as a % of Govt. securities (AFS and HFT category) standing at 3.6% and 3.4% respectively vs. avg. 2.0% of other banks.
- AKD banking universe (ex. NBP and BOP) is currently trading at a CY21F P/B of 0.8x, where abstract factors such as, i) sector being a proxy for Pakistan’s growth story and hence could undergo re-rating, ii) subsiding of foreign outflows (Sep’20TD outflow: US$25.8mn vs avg. monthly FIPI corporate outflow of US$52.1mn), and iii) dividend yield of 8.0% could attract interest in the sector.
AKD Research
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.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.