NBP: Turnaround reflecting in results; upgrade to Buy
- We upgrade NBP from Neutral to Buy with a revised Dec’17 TP of PkR83/sh (Dec’16 TP PkR66/sh earlier), which offers a potential total return of 33%. EPS estimates for CY16/17F have been revised up by 6%/8% to PkR9.71/10.24 on the back of turnaround underway since CY15, which is likely to unlock long awaited earnings potential.
- Since its CY16TD low, the stock has outperformed the IMS Bank Universe by a staggering 26%. We believe this is a function of growing investor confidence on (i) consistent improvement in asset quality and cost efficiencies, and (ii) tremendous potential of non-interest income. The stock trades at CY17F P/B of 0.86x, where narrowing of valuation discount (larger private banks P/B: 1.5x) can unlock upside.
- 2QCY16 earnings of PkR2.84/sh surpassed consensus expectations with support from (i) 10%YoY/31%QoQ rise in NII, (ii) lower loan provisions, (iii) impressive 34%YoY rise in fee income, and (iv) contained 9%YoY increase in admin cost (C/I: 51%). Surprise element in 2H may materialize from unrealized capital gains of PkR45.6bn (on equities: PkR27.8bn).
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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