ABL outperformed the overall banking sector
Allied Bank Limited (ABL) has recently disclosed its detailed accounts for the period of FY09. The bank posted the NPAT of PKR 7.1 Billion during the period comparing to PKR 4.1 Billion during the same period last year which translated 73%YoY growth during the reviewing the period while EPS stood at PKR 9.1 during the comparing to PKR 5.2 during the corresponding period last year. Moreover, the bank announced the final cash dividend of PKR 2.00 per share coupled with 10% bonus shares.
NII surged by 41%YoY
The Net Interest Income of the bank surged by 41%YoY to PKR 18.7 Billion comparing to PKR 13.3 Billion during the same period last year. The massive expansion comparing to the peers was in response of 190bps jump in earnings yield to 13.4% during the period as the bank lend its money by adopting the valuable strategy where peers remained risk averse and preferred to invest the excess liquidity in government instruments. On the other hand, the NIMs of the bank rose by 85bpsYoY to 6.1% comparing to an average NIMs expansion of 33bpsYoY for peers.
Non-interest income upped by 20%YoY
The Non interest income of the bank witnessed 20%YoY increase to PKR 6.0 Billion from PKR 5.0 Billion in last year mainly at the back of increase in gains from the sales of securities to PKR 1.1 Billion. Moreover, the dividend income of the bank took a slight dip where income from foreign currency account rose by 231%YoY.
NPLs improved to 6.5%
The NPLs of the bank increased by 18%YoY to PKR 16.3 Billion which allowed the NPL ratio to stand at 6.5% coupled with the coverage ratio which was at 77% during the period. The bank made the total provisions of PKR 4.5 Billion during the period comparing to PKR 3.2 Billion last year which depicted a massive surge of 41%YoY during the reviewing period. As a proportion of total loan book, exposure to textile declined by 200bpsYoY to 18%, share of sugar was down 63bpsYoY to 1.33% and retail exposure remained flat at 2.5%
Looking Forward
ABL owns enough competence to retain strong bottom-line growth going forward. The bank is targeting to raise its exposure to high yielding SME segment. Moreover, the non-interest income of the bank is expected to remain growing mainly at the back of higher capital gains on its equity portfolio where the bank currently has PKR 2 Billion as un-realized gains. I currently maintain ‘hold’ stance on the ABL’s scrip by considering its FY10E earnings at 6.68x where my target price for FY10 is PKR 69.50 per share.
Showing posts with label Banking Industry of Pakistan. Show all posts
Showing posts with label Banking Industry of Pakistan. Show all posts
Tuesday, April 6, 2010
Monday, April 5, 2010
Banking Sector Spreads 2MFY10 Review
Average deposit rates slipped by 3bps
The State Bank of Pakistan (SBP) has recently released the figures of lending and deposit rates of the banking during the period of 2MFY10. The average deposit rates slipped by 3bps during the period to 6.07% comparing to the last month of the same year while the average lending rates stood at 13.38% from 13.35% during the period by translating 3bpsMoM increase.
Spreads depicted the increment of 6bps
The interest rate spread depicted the increment of 6bpsMoM to 7.31% comparing to 7.25% during last month. Initially, it was continuously in downtrend since the period of 1MFY09 where it recorded its peak of 7.78%.
Fresh loan spread turned down by 7bps
The interest spread on fresh lending vs. deposits witnessed a decline of 14bps to 6.28% while the interest rates on fresh loans turned down by 7bps to 13.46% along with a cost of fresh deposits who jumped by 7bps to 7.18% during the period. This dwindling trend highlights the risk that maintaining the positive momentum in spreads would be a challenge and spreads could face pressure going forward.
6M KIBOR positioned at 12.19% on average
The average 6-Months KIBOR stood at 12.19% during the period due to the continuation of easing the monetary policy stance by the State Bank of Pakistan (SBP). Initially, the rate touched its peak level of 15.67% during 12MFY09.
Looking Forward
I am expecting the interest rate spreads to remain above the level of 7% in FY10 mainly at the back of recovery of inflation which is likely to keep the interest rates stable in short term to consolidate the lending rates while deposit rates are to remain around the same level mainly at the back of imposition of floor of 5% by SBP on CASA accounts. I am currently maintaining the ‘neutral’ stance on banking sector.
The State Bank of Pakistan (SBP) has recently released the figures of lending and deposit rates of the banking during the period of 2MFY10. The average deposit rates slipped by 3bps during the period to 6.07% comparing to the last month of the same year while the average lending rates stood at 13.38% from 13.35% during the period by translating 3bpsMoM increase.
Spreads depicted the increment of 6bps
The interest rate spread depicted the increment of 6bpsMoM to 7.31% comparing to 7.25% during last month. Initially, it was continuously in downtrend since the period of 1MFY09 where it recorded its peak of 7.78%.
Fresh loan spread turned down by 7bps
The interest spread on fresh lending vs. deposits witnessed a decline of 14bps to 6.28% while the interest rates on fresh loans turned down by 7bps to 13.46% along with a cost of fresh deposits who jumped by 7bps to 7.18% during the period. This dwindling trend highlights the risk that maintaining the positive momentum in spreads would be a challenge and spreads could face pressure going forward.
6M KIBOR positioned at 12.19% on average
The average 6-Months KIBOR stood at 12.19% during the period due to the continuation of easing the monetary policy stance by the State Bank of Pakistan (SBP). Initially, the rate touched its peak level of 15.67% during 12MFY09.
Looking Forward
I am expecting the interest rate spreads to remain above the level of 7% in FY10 mainly at the back of recovery of inflation which is likely to keep the interest rates stable in short term to consolidate the lending rates while deposit rates are to remain around the same level mainly at the back of imposition of floor of 5% by SBP on CASA accounts. I am currently maintaining the ‘neutral’ stance on banking sector.
Monday, August 31, 2009
United Bank Limited (UBL) 1HCY09 Review
NPAT dwindled by 23%YoY
United Bank Limited (UBL) recently declared its financial result for 1HCY09. The 1HCY09 was quite disappointing in terms of profitability as the bank posted its NPAT of PKR 4.29 Billion compare to 5.59 Billion in 1HCY08 which translated a decline of 23%YoY and 32%QoQ; the profit before tax was PKR 6.77 Billion in result of 24%YoY decline; the EPS of the bank also shrunk by 23%YoY to PKR 3.85. UBL did not declare any interim payout for 1HCY09
However, the increase in KIBOR rates and 13% average increase in advances brought the increase in interest income of the bank by 20%YoY to PKR 15.83 Billion compare to PKR 13.22 Billion during the same period last year. The Operating revenue also increased by 17%YoY to PKR 22.61 Billion compare to PKR 19.25 Billion during the same period last.
In spite of the high inflationary pressures (average 1HCY09 CPI at 17.6%), the bank made just 11%YoY increase in its Administrative expenses compare to the same period last year.
Higher NPL significantly impacted the results
Although the Net interest income before provisions grew by 20%YoY but on the other hand the non-performing loans (NPL) made a drastic increase of 153%YoY to PKR 6.42 Billion compare to PKR 2.54 Billion during the same period last year. The advance to deposit ratio (ADR) was 72% during the period.
Net interest income after provisions decreased by 12%YoY compare to the same period last year at PKR 9.41 Billion. Provisions are up by PKR 2.5 Billion to PKR 6.4 Billion this year mainly due to elevated corporate and on-going consumer portfolio provisions. The provisioning charge also includes PKR 484 Million charged on account of impairment loss taken on the equities portfolio.
The Net interest margins (NIMs) remained strong at 6.3% owing to higher interest rates and attractive returns on the investment portfolio. However, NIMs on a year on year basis were impacted by an increase in the cost of deposits as a result of SBP regulation of 5% minimum rate of return on saving deposits which came into effect in June 2008.
Flimsy Macro-economic indicators for whole SectorThe upshots of the global financial crisis remained annoying for Pakistan’s economy which resulted in 2% GDP growth during FY09. The political instability and increased militancy in the northern areas of the country also took its toll on the economy both in terms of direct costs of the fight against extremism as well as affecting investment inflows and investor confidence in the country.
However, the IMF program played an important role to bring some strength in key economic indicators. Foreign exchange reserves which dropped to even lower than USD 7 Billion in November 2008 had now increased to USD 11.4 Billion in June 2009. Current account deficit also lowered by 23% this year at USD 8.5 Billion along with decrease in trade deficit to USD 14 Billion against USD 16.8 Billion compare to last year. Remittances again showed up trend by 21% to USD 6.4 Billion this year which also helped to stabilize the external account.
The chief challenges, however, which should have to be resolved in order to restore the economy growth and investors’ confidence in the Pakistan remain the acute energy crisis and the increased threat of militancy and extremism. Given the government’s current focus on these issues, I stay watchfully hopeful that the economic indicators will continue to improve this year for the overall banking sector.
Looking Ahead
UBL being the most attractive stock within the private commercial banks showed a slightly better incremental stock performance during the subjected period. The stock price of the bank mounted by 13% in CY09 to date compared to 31% rise in the benchmark index on KSE. However, the inclusion of a further 1% decline in the discount rate to 12% in recent monetary policy gave an obvious hope of betterment in near future and I am anticipating that its stock price will reach to PKR 65/share in FY09. I maintain the ‘buy’ stance for the bank.
United Bank Limited (UBL) recently declared its financial result for 1HCY09. The 1HCY09 was quite disappointing in terms of profitability as the bank posted its NPAT of PKR 4.29 Billion compare to 5.59 Billion in 1HCY08 which translated a decline of 23%YoY and 32%QoQ; the profit before tax was PKR 6.77 Billion in result of 24%YoY decline; the EPS of the bank also shrunk by 23%YoY to PKR 3.85. UBL did not declare any interim payout for 1HCY09
However, the increase in KIBOR rates and 13% average increase in advances brought the increase in interest income of the bank by 20%YoY to PKR 15.83 Billion compare to PKR 13.22 Billion during the same period last year. The Operating revenue also increased by 17%YoY to PKR 22.61 Billion compare to PKR 19.25 Billion during the same period last.
In spite of the high inflationary pressures (average 1HCY09 CPI at 17.6%), the bank made just 11%YoY increase in its Administrative expenses compare to the same period last year.
Higher NPL significantly impacted the results
Although the Net interest income before provisions grew by 20%YoY but on the other hand the non-performing loans (NPL) made a drastic increase of 153%YoY to PKR 6.42 Billion compare to PKR 2.54 Billion during the same period last year. The advance to deposit ratio (ADR) was 72% during the period.
Net interest income after provisions decreased by 12%YoY compare to the same period last year at PKR 9.41 Billion. Provisions are up by PKR 2.5 Billion to PKR 6.4 Billion this year mainly due to elevated corporate and on-going consumer portfolio provisions. The provisioning charge also includes PKR 484 Million charged on account of impairment loss taken on the equities portfolio.
The Net interest margins (NIMs) remained strong at 6.3% owing to higher interest rates and attractive returns on the investment portfolio. However, NIMs on a year on year basis were impacted by an increase in the cost of deposits as a result of SBP regulation of 5% minimum rate of return on saving deposits which came into effect in June 2008.
Flimsy Macro-economic indicators for whole SectorThe upshots of the global financial crisis remained annoying for Pakistan’s economy which resulted in 2% GDP growth during FY09. The political instability and increased militancy in the northern areas of the country also took its toll on the economy both in terms of direct costs of the fight against extremism as well as affecting investment inflows and investor confidence in the country.
However, the IMF program played an important role to bring some strength in key economic indicators. Foreign exchange reserves which dropped to even lower than USD 7 Billion in November 2008 had now increased to USD 11.4 Billion in June 2009. Current account deficit also lowered by 23% this year at USD 8.5 Billion along with decrease in trade deficit to USD 14 Billion against USD 16.8 Billion compare to last year. Remittances again showed up trend by 21% to USD 6.4 Billion this year which also helped to stabilize the external account.
The chief challenges, however, which should have to be resolved in order to restore the economy growth and investors’ confidence in the Pakistan remain the acute energy crisis and the increased threat of militancy and extremism. Given the government’s current focus on these issues, I stay watchfully hopeful that the economic indicators will continue to improve this year for the overall banking sector.
Looking Ahead
UBL being the most attractive stock within the private commercial banks showed a slightly better incremental stock performance during the subjected period. The stock price of the bank mounted by 13% in CY09 to date compared to 31% rise in the benchmark index on KSE. However, the inclusion of a further 1% decline in the discount rate to 12% in recent monetary policy gave an obvious hope of betterment in near future and I am anticipating that its stock price will reach to PKR 65/share in FY09. I maintain the ‘buy’ stance for the bank.
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