AKD Quotidian about — Banks: Universe Result Previews

Karachi, October 21, 2013 (PPI-OT): Banking sector result season kicks off from this week where AKD Securities reiterates that earnings in general are likely to continue their downtrend in 3QCY13 as NIMs continue to compress.

According to AKD Securities only NBP may end up posting sequential growth and that too if subjective Bangladesh provisions do not stage a comeback. On the flipside, upcoming 3QCY13 earnings for MCB are likely to be sharply lower on a QoQ basis coming from a high base (ULEVER sale gains in 2QCY13). A similar trend is therefore expected to manifest in 9MCY13 with earnings for the most part being lower than in 9MCY12. From an investment perspective however, considering banks have already shed 12.1% since the SBP linked the rate floor on savings deposits to the DR, AKD Securities believes any further downside is limited. Accordingly, AKD Securities believes any weakness in share prices post possible disappointing 3QCY13 results should be taken as an opportunity to build positions. AKD Securities preferreds plays are UBL, ABL and BAFL.

AKD Banks Universe: Earning Previews
EPS(PkR)  3QCY13F    QoQ   9MCY13F   YoY    3QCY13 DPS
MCB        5.08     -19%    17.15     2%     3.50 
NBP        2.01      39%     5.25   -12%       -
HBL        3.71      -7%    11.50   -10%     3.50
UBL        3.46       1%    10.7    -12%     2.00
ABL        2.33     -11%     7.70   -17%     1.25
BAFL       0.66      -4%     2.10   -17%

Source: Company Reports and AKD Research

Universe result previews: Having released AKD Securities earnings projection for HBL earlier, AKD Securities previews earnings for the rest of the AKD Banking Universe in today’s Daily. For the most part, AKD Securities expects sequential earnings declines to continue in 3QCY13 with NIMs likely to have trended lower (6M KIBOR averaged 9.2% in 3QCY13 vs. 9.5% in 2QCY13). Only NBP may end up posting sequential growth and that too if subjective Bangladesh provisions do not stage a comeback.

On the flipside, upcoming 3QCY13 earnings for MCB are likely to be sharply lower on a QoQ basis coming from a high base (ULEVER sale gains in 2QCY13). Earnings surprises are only likely to emanate from provisions and capital gains. However, dividend payments should remain on track given the strong capital bases of coverage banks.

Investment perspective: Banks have shed 12.1% since the SBP linked the rate floor on savings deposits to the DR. That said, AKD Securities believes regulatory risk has adequately been priced in where AKD Securities retains a Market weight stance on Pakistan Banks. In this regard, AKD Securities believes any weakness in share prices post possible disappointing 3QCY13 results should be taken as an opportunity to build positions in names such as UBL (TP: PkR130/share), ABL (TP: PkR85/share) and BAFL (TP: PkR21/share).

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