Pakistan Banks_TSA Regulatory headwinds on the horizon (AKD Daily, April 18, 2019)
- GoP in consultation with State Bank of Pakistan (SBP) is examining feasibility of introducing Treasury Single Account (TSA), where the objective is to transfer GoP deposits maintained with Commercial Banks to the SBP.
- On a broader perspective, TSA implementation could reduce GoP borrowings particularly from Central Bank (current: 15.2% of GDP vs. historical acceptable limit of IMF of 9-10% of GDP). However, GoP would still need to tap commercial banking resources, where competition between private sector and GoP could improve asset yield in return.
- While immediate enactment of the mechanism would not only severely constrain liquidity for public and most private banks (see side table) but also negatively impact of profitability of our universe (EPS Impact: 5-50% of CY18 earnings) - a more prudent approach could be a phase-wise implementation.
- We continue to have a preference for MCB (TP: PkR224.7; Total return: 29.2%) and MEBL (TP: PkR115.8; Total return: 25.5%) where the two are relatively better placed even in case of TSA implementation.
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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