Report
Jaap Meijer
EUR 7.42 For Business Accounts Only

Normalization in credit charges offsetting lower FX income; RoE target still challenging.


  • Burgan’s RoE target of 15% appears overly ambitious after achieving only 9.5% in FY 16A (after ADT1, though 13.5% ex precautionary reserves), due to significant pressure on NIMs and F&C, despite lower bad debt charges. RoE expansion is likely to be slow, and driven by NIM expansion (higher rates, redemption B2 T2 legacy bonds), but CoR (71bps) is already very close to TTC levels and improvements in foreign operations (more macro driven).
  • For FY 16A Burgan slightly beat our estimates (by 3.5%) thanks to loan recoveries that offset higher than expected OpEx. Lower extraordinary income (FX) could be absorbed by lower net bad debt charges on a y/y basis. Earnings from continuing ops increased by 4.1% (group basis) and 12.1% (attributable basis), despite pressure on NII (-1%), F&C (-5%) and FX (-41%).
  • We maintain our Hold and TP of KWD 0.34 (+6% upside) and leave our forecasts unchanged despite slightly lower NII and higher OpEx.


Provider
Arqaam Capital
Arqaam Capital

Established in 2007, Arqaam Capital is a specialist emerging markets investment bank, bringing regional and international product offerings to the emerging markets. Arqaam Capital combines international best practice with expertise in the markets in which we operate. Our primary role is to provide financial intermediation and create investment opportunities for frontier and emerging markets investors looking to invest in their own markets and abroad, as well as international investors seeking opportunities in target frontier and emerging markets. Arqaam Capital is headquartered in the Dubai International Financial Centre (DIFC), with additional offices in Libya, Lebanon, Egypt, and South Africa. 

Arqaam Capital's research platform provides the largest coverage footprint of MENA equities and one of the largest on the African continent with a total of 300 stocks under coverage. Arqaam Capital is ranked as one of the leading research providers in the region - a reflection of its broad coverage universe, its in-depth and high quality research, as well the compelling investment ideas that the team generates. The analysts closely analyze their sectors and issue in-depth company and sector research while the strategy team connects the micro with the macro, focusing on index analysis, macroeconomics and strategy research. 

Analysts
Jaap Meijer

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