Intermarket Pulse: BAFL: High growth at a reasonable price
- Following below expected CY17 results (EPS: PRs5.30), we trim our CY18F/19F EPS estimates by 2%/1%. However, improved prospects for medium-term cost efficiencies lift our estimates in later years; together with adequate room to maintain c. 33% payout ratio, this raises our Dec'18 TP to PRs53/sh (previously PRs50/sh).
- BAFL is highly leveraged to the interest rate up-cycle and NIMs should approach 4% in the next 3-4yrs. Even if it looks for more measured balance sheet expansion, the bank should still deliver growth of 15-20%YoY in the next 2yrs. With restructuring costs out of the way in CY17, impetus to earnings should arise from consistently reducing C/I.
- BAFL’s PRs7bn ADT-1 issuance should allow space on CAR to fund both growth and payouts (CY17 CAR: 13.8%; Tier-I: 11.3%). We see ROE (incl. surplus) rising from 13.5% in CY18F to 14.9% by CY22F which should unlock higher valuations. BAFL trades at a CY18F P/B of 0.96x and P/E of 7.77x where our revised TP offers 10% upside.
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.
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.