MENA banks 2Q21 results preview | Enhanced profitability; Flag KFH, BJAZ, FAB, CAE as outperformers
Stay selective amid decent quarter. While both KFH and FAB do not fall within our MENA top pick list, given their rich valuations (FY21e P/BV: 3.04x and 2.27x, respectively), we expect them to likely emerge as the outperformers within their corresponding countries in terms of 2Q21e results. From our MENA top pick list, we also flag BJAZ (balanced loan book, improving funding/cost structures, and attractive valuation) and CAE (undemanding valuation, active credit strategy, optimal tax positioning, and high dividend yield) as potential outperformers for 2Q21e.
Nearly all MENA banks under coverage to deliver higher y-o-y earnings in 2Q21e. Aggregate net income to grow c29% y-o-y and c1% q-o-q in 2Q21e. Kuwait banks are seen delivering the uppermost y-o-y earnings growth among MENA peers, while Saudi banks are to beat on loan growth (+3.6% q-o-q vs. +2.4%, +0.5%, and +0.5% for Egypt, UAE, and Kuwait banks, respectively). We look for: i) largely stable NIMs q-o-q, ii) moderate growth in fee income, pending further improvement in loan origination, iii) continued opex control, and iv) light provisioning.
Kuwait banks to beat on low earnings base; Saudi excites on balance sheet. Kuwait banks’ aggregate earnings are anticipated to surge 3.1x y-o-y in 2Q21e (vs. +28% for Saudi, +13.5% for UAE, and +11% for Egypt banks), being the most hit by a slump in activity and heavy provisions in 2Q20. Reported sector figures (through May for Saudi and April for Kuwait, Egypt, and the UAE) indicate a continued beat for Saudi banks, on loan and deposit growth, over MENA peers in 2Q21e. Mortgage growth in Saudi decelerated in Apr-May (on seasonality, in our view), but we expect a better closure for the quarter. Early signs of recovery in lending in the UAE and Kuwait (retail lending in particular for the latter) are taking shape.
Pre-emptive provisioning, waning NIM compression to back Egypt banks’ recovery in 2Q21e. Earnings should rise 11% y-o-y and remain flat q-o-q in 2Q21e, on our figures, boosted by lighter provisioning, compensating for moderately declining NIMs. CAE is anticipated to outshine its peers, with earnings expected to edge up c20% y-o-y in 2Q21e. Consolidated sector loans in Egypt are seen growing 2.5% q-o-q in 2Q21e (vs. 3.6% in 1Q21) and deposits 1.7% q-o-q (vs. 4.5% in 1Q21).
CI Capital is a diversified financial services group and Egypt’s leading provider of leasing, microfinance, and investment banking products and services.
Through its headquarters in Cairo and presence in New York and Dubai, CI Capital offers a wide range of financial solutions to a diversified client base that include global and regional institutions and family offices, large corporates, SMEs, and high net worth and individual investors.
CI Capital leverages its full-fledged investment banking platform to provide market leading capital raising and M&A advisory, asset management, securities brokerage, custody and research. Through its subsidiary Corplease, CI Capital offers comprehensive leasing solutions, including finance and operating leases, and sale and leaseback, serving a wide range of corporate clients and SMEs. In addition, CI Capital offers microfinance lending through Egypt’s first licensed MFI, Reefy.
The Group has over 1,700 employees, led by a team of professionals who are among the most experienced in the industry, with complementary backgrounds and skill sets and a deep understanding of local market dynamics.
CI Capital has been recognized as the “Best Investment Bank in Egypt” by EMEA Finance for four years running from 2013-2016, and by Global Finance in 2014 and 2015.
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