HBL: Short-term pain before a rebound
- Following below expected 1QCY18 result (EPS: PRs3.12; -49%YoY) and confirmation that the NY fine will continue to have aftereffects, we lower our CY18-22F EPS estimates for HBL by 6% on average. Estimates revision incorporates Super Tax over the next few years (albeit progressively lower by 1% pa) and drag from overseas business. Our Dec’18 TP is now PRs190/sh. We maintain our Neutral stance.
- The domestic franchise remains strong but foreign operations posted a loss in 1QCY18. Taking cue from 1QCY18, we cut estimates on cost slippages and slowdown in fee & fx income - these are a function of spillover from NY operations. We think that until the foreign business comes into the black, it will continue to blur domestic performance.
- HBL is comfortable on Tier-1 and Total CAR (1QCY18: 12.3% / 16.5%) where we see a 40% payout going forward without need for more capital. While we like medium to long term prospects, interim constraints on profitability may keep share price in check for now. HBL trades at a CY18F P/B of 1.4x and P/E of 12.1x (CY19F: 1.2x and 7.9x).
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.
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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