EUR 10.00 For Business Accounts Only

Pakistan Listed Banks Comp Sheet with Key Observations (Mar 13, 2019)

• Post issuance of annual accounts 2018, we present our key findings on Pakistan listed banks (except for SILK and JSBL whose 2018 annual accounts are not yet available). To note, banks have made some changes to the format of financial reporting, the most impactful of which is the reclassification of cost of foreign currency swaps which are now classified under interest expense (previously was netted against income from foreign currency). This has effectively reduced the net interest income, making previous year NII incomparable unless adjusted. We have incorporated the restated financial statements in our working. Moreover, banks have started to publish break-up of fee income that was not available previously.
• From a valuation perspective, banks are trading at PE of 9.9x compared to PE of 11.4x in March last year. We attribute this decline in PE ratio to the significant fall in prices of select banks like HBL and UBL. The bank with notable decline in PE ratio is SCBPL, down from 11.7x in 2017 to 8.4x led by exceptional EPS growth.
• Similarly, sector is also trading at PBV of  1.1x vs 1.3x in same period last year. HBL recorded significant decline in PBV, down to 1.0x vs 1.5x in same period last year.
• ROE of the sector fell slightly by 20bps to 13.3% due to flattish profitability growth and rising equity. The primary drag on ROE came from UBL, where UBL’s ROE declined by 8.9ppts to 10.6%. Notable decline was also witnessed in ROE of BOK, AKBL and NBP, down by 8.8ppts, 4.4ppts and 4.1ppts, respectively. 
• Deposits of listed banks grew by 10% YoY to Rs13.1tn (up by Rs1.3tn) with SBL reporting significant growth of 19% YoY. However, in absolute terms National Bank added a significant Rs284bn to Pakistan listed banks’ total deposits.
• Majority of growth in deposits stems from non-remunerative current accounts (CA) growth (up 15% YoY; Rs627bn) with CA to deposit ratio up by 156bps YoY. NBP increased CA ratio markedly (up 5.5ppts YoY) while SCBPL maintained notable CA ratio at 44%. BOP had low CA ratio at 21% with 4.1ppts decline YoY.