UBL & BOP_CY20 Result Previews, (AKD Daily, Feb 15, 2021)
AKD Daily
UBL & BOP: CY20 Result Previews
UBL’s CY20 earnings likely to clock in at PkR16.4/sh; expect DPS of PkR9.5/sh: United Bank Limited (UBL) is scheduled to announce its CY20 result on 24th Feb, 2020 where we expect the bank to announce earnings of PkR19.6bn (EPS: PkR16.4/sh), +3.7%YoY where 23.7% jump in net interest income is likely absorbed by higher provisioning costs (cost of provisioning est. to stand at 0.7%). For 4QCY20, we expect earnings to clock in at PkR4.3bn (EPS: PkR3.58), down 8.5%/11.7% QoQ/YoY where sequential downtick is attributable to NIMs faltering to 4.3% vs. 4.6% in 3QCY20 potentially due to Govt bond maturities. However, some respite is offered by non-funded income which is likely to be +37.6%QoQ due to normalization in fee income. Earnings are further compressed by seasonal higher administrative costs (+18.6%QoQ) and continuation of higher provisioning costs (cost of provisioning assumed at 0.7%). Together with the result, the bank is expected to announce dividend of PkR9.5/sh, taking cumulative dividend for the year to PkR12/sh. We have a buy stance on the stock with Dec’21TP of PkR142.5/sh, offering a capital upside of 10.1% from last close.
BOP’s earnings likely to decline 45.6%QoQ in 4QCY20 to PkR0.43/sh, capital gains could come into play: The Bank of Punjab (BOP) is due to announce its CY20 result on 19th Feb, 2020 where bank’s earnings are expected to clock in at PkR6.9bn (EPS: PkR2.6) vs. PkR.3bn (EPS: PkR3.1) in the same period last year. Together with the result, BOP is expected to announce a dividend of PKR0.75/sh. On a quarterly basis, the bank’s EPS is likely to be recorded at PkR0.43, down 46.5%QoQ/47.1%YoY. Sequential decline in earnings is attributable to, i) normalization in NIMs (4QCY20E: 2.0% vs. 2.5% in the previous quarter) by virtue of bond maturities and full repricing in the earlier part of the quarter/end of previous quarter (unrealized gains declined to PkR4.7bn in Sep’20 vs. PkR13.8bn in Jun’20) and bank realizing gains on its bond portfolio (9MCY20: PkR8.0bn), ii) lower capital gain in the current quarter, and iii) provisioning costs likely to continue though at smaller scale (PkR1.1bn assumed for 4QCY20, likely a result of downgrading of NPLs vs. PkR2.4bn in the previous quarter). We have a buy stance on the stock with Dec’21TP of PkR13.9/sh where key risk to our thesis is the implementation of TSA by Punjab Government (Provincial govt. deposits account for 51.8% share in total deposits) and breakout of credit costs (NPLs: +14.6% to PkR59.2bn in 9MCY20).
AKD Research
Bank of Punjab is a commercial banking group based in Pakistan. Co. is engaged in the provision of commercial banking activities such as short term financing for working capital; financing under cash finance, demand financing, running financing and lease financing; equity underwriting; trust receipts; deposit taking; the provision of loans; foreign exchange transactions; investments and placements. In addition, Co. also acts as a clearing house for the transfer of bank funds throughout 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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