Avior Financials | SBK Q1 update | SA banks' credit growth and foreign ownership | AFH | A2X | Insurance valuations

In this week's Avior Financials note:

SBK's Q1 '19 trading update showed 8% YoY growth in earnings attributable to ordinary shareholders. While Q1 '18 represented a low base for earnings (-1% YoY), the trading update was ahead of our expectations considering restructuring costs, currency pressure and higher credit impairment charges.

The BA 900 data for Feb '19 shows that FirstRand achieved the highest retail advances growth YTD. Despite an increase in ABSA's advances growth, ABSA is still lagging the market in retail advances growth.

SA banks' (excluding Capitec) foreign ownership declined in H2 '18. However, based on Bloomberg data, Capitec's foreign ownership has been increasing over the last three years. Excluding PSG, Capitec's foreign ownership is similar to ABG and FSR at c.50%.

King Price Insurance's CEO Gideon Galloway stated that the Group is considering bidding up to R2bn for Alexander Forbes's (AFH) short-term insurance business. A formal offer from King Price Insurance would be positive for our valuation and prove that AFH has a high-quality retail insurance book

The JSE Ltd's trading statistics (to 18 Apr ‘19) show a 21.3% YoY decline in cash equity value traded YTD. There are now 18 companies listed on A2X (Mr Price to list on 2 May). A2X noted that smart order router technology is being used in SA for the first time. Legae Peresec has been the most active broker on A2X YTD.

The SA insurance sector has underperformed the JSE all share index YTD due to weak economic conditions. Discovery remains our top pick.