Habib Bank Limited : Estimates revised on higher admin expenses; Reiterate Buy
- Notwithstanding two major negative surprises in Habib Bank Ltd’s (HBL) 2Q18 earnings, detailed account and management discussion highlight solid progress on bank’s capital rebuilding and the strength of domestic franchise.
- 1H18 results suggests bank’s continuing thrust on local operations to make up for the lost momentum on int’l business and to cope with the sizeable hit to bank’s capital in 2017. All in all, we now see a longer tail for the recovery in bank’s earnings.
- We have cut our earnings estimates for HBL by 11/4/1% over CY18/19/20E as we adjust down estimates for above-expected cost of business restructuring, legal/consultancy charges on NY operation and FX losses.
- Domestic advances (+29% YoY), overall asset quality (NPL: 7.6%, down from 8.2% in Dec’17), and funding profile (CASA: 84.2%, +70bps) paint an encouraging picture for HBL in 1H18 and will likely support strong recovery in earnings in 2H18.
- Meanwhile, RWA management and continuing restrain on payout has allowed HBL to lift its Tier I ratio to 12.8%, (+80bps) vs the mandated requirement of 12% in CY19. We believe restrain on payout will likely continue until 1Q19.
Habib Bank Limited is engaged in commercial banking and asset management related services in Pakistan and overseas. The Bank's segments include Branch Banking, which consists of loans, deposits and other banking services to agriculture, consumer, small and medium-sized enterprise (SME), and commercial customers; Corporate Banking, which consists of lending for project finance, trade finance and working capital to corporate customers and it also provides investment banking services, including services provided in connection with mergers and acquisitions; Treasury, which consists of trading, fixed income, equity, derivatives and foreign exchange businesses, and it also includes credit, lending and funding activities with professional market counterparties; International Banking, which is engaged in monitoring and reporting purposes and consists of its operations outside of Pakistan, and Head Office/Others. It operates in Pakistan; Europe, Middle East and America, and Asia and Africa.
BMA is amongst the leading financial groups in Pakistan. BMA Capital’s core areas of business include Capital Markets, Corporate Finance & Advisory, Asset Management, and Financial Products Distribution. BMA Capital is the leader in privatisation advisory in Pakistan, having successfully advised on over 50% of all privatisations in Pakistan, by value, in transactions valued in excess of US$4 billion. Recent transactions include joint lead managing the $813 million GDR Offering of 10% of OGDCL on the London Stock Exchange in 2006-07, and advising Etisalat on their successful acquisition of a 26% strategic stake in Pakistan Telecommunications Company Limited (PTCL) for US$2.6 billion, the largest M&A transaction and foreign direct investment in Pakistan’s history. The firm is among the top brokers in the Pakistan equity and treasury markets, and is among a handful of firms that comprehensively cover all segments of the capital markets. This is supported by a very strong and independent research capability, which is quoted regularly in both local and international media. BMA Capital’s retail brokerage brand, BMA Trade, has launched a nationwide network of branches as well as a comprehensive online trading platform, enabling investors across Pakistan to take part in the capital markets.
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.