BAFL: Focus remains on Balance Sheet quality; Neutral maintained
- We maintain Neutral stance on BAFL with a revised Dec'17 TP of PkR43.5/sh (vs. PkR42.0/sh previously). Our revised CY17/18F EPS estimates of PkR5.25/5.49 (up 1%/3%) reflect the tremendous amplification of CASA and continuation of loan growth trend, which should mitigate the impact of stable interest rates this year.
- BAFL posted consolidated NPAT of PkR7.89bn (EPS: PkR4.95 in CY16), up 5%YoY, backed by 13%YoY drop in interest expense, contained growth in admin expenses, and lower loan provisions. The bank announced a surprise dividend cut with the intent to not compromise on its lending prospects, which should bode well for earnings growth.
- BAFL is currently trading at CY17F P/B of 0.92x and P/E of 7.38x, implying a 55% discount to Big-5 banks (ex. NBP). The stock is up 62% from its CY16 low, where the market has appreciated the positives leading to earnings growth.
Bank Alfalah Limited is a holding company. The Company's segments include Retail banking, including loans, deposits, trading activity, wealth management and other banking transactions with its retail and middle market customers; Corporate banking, which includes loans, deposits, project financing, trade financing, investment banking and other banking activities with its corporate and public sector customers; Treasury, including liquidity management activities carried out through borrowing, lending and money market operations; Consumer banking, including constitutes consumer financing activities with individual customers; Islamic banking, pertaining to its full scale Islamic Banking operations; International operations, which includes amounts related to its overseas operations, namely, commercial banking activities in Bangladesh and Afghanistan, and wholesale banking activities in the Kingdom of Bahrain, and Others, including merchant banking related activities.
Intermarket Securities Limited (IMS) is a full service corporate brokerage firm based in Karachi, Pakistan. We service both domestic and international clients. IMS was ranked #2 Best Local Brokerage and #3 Best for Overall Country Research for 2016 by AsiaMoney.
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