Intermarket Pulse: NBP: Continues to surprise; maintain Buy
- We revise our Dec’17 TP for NBP to PkR92/sh (from previous PkR89/sh), which offers a total return of 33% (Stance: Buy). Our revised CY17/18F EPS estimates of PkR11.31/11.89 (up 9%/5% from previous) reflect the improved asset quality, loan growth and cost control depicted in the CY16 result.
- NBP’s impressive earnings streak continues with the bank posting all-time high consolidated NPAT of PkR23.04bn (EPS: PkR10.83) in CY16, much higher than consensus expectation. Tier-I ROE clocked in at 19% (first time since CY09), heading close to top tier bank levels. Loan provision reversal of PkR2.25bn in 4QCY16 (reported for the first time ever since CY07) was the highlight.
- NBP trades at CY17F P/B of 0.82x and P/E of 6.64x, implying a considerable discount to the large private banks despite similar Tier-I ROEs. The bank is in the midst of a turnaround, with leveraging of strong capital base, unique fee franchise and improved cost efficiencies to likely transpire into true earnings potential, in our view.
National Bank of Pakistan (the Bank) is a Pakistan-based commercial bank. The Bank provides commercial banking services, including commercial loans, investment advisory, asset management, global remittances, agency services, forex, leasing, modarba, underwriting, brokerage, and other banking and financial services. The Bank offers retail products, which include saving deposits, current deposits, housing finance, personal loans and agricultural loans; transaction banking services, which include cash management, trade finance and services, and remittance management; Corporate Finance services, which include deposits, structured corporate finance, capital advisory, investment advisory and trade finance; Treasury services, which include forex and financial derivatives, and government to person (G2P) services, which include pension payments, tax and fee collection, and other payments. The Bank serves its customers in over 20 countries.
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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