Topline Securities Limited - The Bank of Punjab (BOP) Bank of Punjab (BOP): 1Q2018 EPS of Rs0.7, 24% YoY, 2017 LPS Rs1.3 (2016 EPS Rs1.8) (Better than expectations)

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Topline Securities Limited

EUR 12.20 For Business Accounts Only

Bank of Punjab (BOP): 1Q2018 EPS of Rs0.7, 24% YoY, 2017 LPS Rs1.3 (2016 EPS Rs1.8) (Better than expectations)

BOP announced its 1Q2018 earnings of Rs0.7/share, up 24% YoY and were better than expectations. In 2017, the bank declared loss of Rs1.3/share as the bank booked provision charge of Rs14bn against the NPLs. To recall, we had mentioned in our coverage initiation report on BOP that the bank was required to provide for the backlog of its NPLs which had to be booked till the end of 2018. The bank booked this provisioning charge during 2017 which was earlier than expectation due to overall improvement in its banking operations & performance.
Net Interest Income (NII) of the BOP improved by 42% YoY to Rs4.7bn in 1Q2018 which was better than the expectations. This was likely due to strong balance sheet growth and recovery in interest income against NPLs, we believe. This led to strong earnings growth during the quarter.
BOP also booked provision reversals of Rs182mn in 1Q2018 on back of recoveries against NPLs. Reversals in 1Q2017 stood at Rs441mn.
Non-interest income of the bank remained flat at Rs923mn during 1Q2018 due to lower capital gains. Fee, commission & brokerage income was up 14% YoY to Rs273mn in 1Q2018.
Non-interest expense of BOP increased by 22% to Rs2.8bn which was in line with historical quarterly average.
In 2017, BOP had booked loss per share of Rs1.3 vs. earnings of Rs1.8/share in 2016 mainly on back of higher provisioning charge as discussed. NII of BOP in 2017 was up 27% YoY however non-markup income was down 13% YoY as capital gains booked remained on lower side.
The management in its notice stated that the bank had faced constraints regarding dividend payout due to the relaxation given to bank on NPL provisioning but the bank now has made the required provisioning as per SBP requirement.
Key risks for the company include 1) delay in hike in policy rate, 2) lower than expected advances and deposit growth, 3) deterioration in Pakistan macros, & 4) pile up in NPLs.

26/04/2018 5 EN

Underlying

The Bank of Punjab

Bank of Punjab is a commercial banking group based in Pakistan. Co. is engaged in the provision of commercial banking activities such as short term financing for working capital; financing under cash finance, demand financing, running financing and lease financing; equity underwriting; trust receipts; deposit taking; the provision of loans; foreign exchange transactions; investments and placements. In addition, Co. also acts as a clearing house for the transfer of bank funds throughout Pakistan.

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PK0045001010 Pakistan Stock Exchange Pakistan

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Topline Securities Limited

Topline Securities is one of the fastest-growing brokerage houses in Pakistan. It has strong Equity Brokerage, Economic/ Equity Research, Commodity Trading and Corporate Finance & Advisory functions.

Topline Securities has been endowed with numerous awards by renowned international financial organizations. The highlights of which consists of the award for ‘Best Local Brokerage House of Pakistan’ by Asiamoney Brokers Poll (the largest Asia-focused equity services provider poll) in 2016 and ‘Best Equity Brokerage House’ by CFA Society Pakistan in 2015.

Previously, Topline Securities held the title for ‘Best Brokerage House’ for 4 consecutive years (2011-2014) by Asiamoney Brokers Poll. Other awards include the ‘Best Salesperson’ award by Asiamoney for 6 consecutive years (2011-2016), the ‘Arabia Fast Growth 500’ award and ‘Pakistan Fast Growth 100’ award in 2012 and 2013 by AllWorld Network.

JCR-VIS, a credit rating agency providing independent rating services in Pakistan has assigned initial rating of “A-2” for short term and “A” for long term to Topline Securities. Topline Securities is registered as Underwriter, Book Runner and Research Entity with Securities & Exchange Commission of Pakistan (SECP).

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Bank of Punjab (BOP): 1Q2018 EPS of Rs0.7, 24% YoY, 2017 LPS Rs1.3 (2016 EPS Rs1.8) (Better than expectations)

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