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AKD Quotidian about — Pakistan Banks: Poor 4QCY12 drags overall CY12 growth

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by March 8, 2013 Brokerage

Karachi, March 08, 2013 (PPI-OT): Listed commercial banks (20 out of 22 listed banks) have posted combined NPAT of PkRI17.6bn in CYI2 vs. combined NPAT of PkRIO7.4bn in CY1I, up 9%YoYwith lower provisions (-28%Y0Y) and higher non-interest income (+27%Y0Y) countering a 3%YoY decline in NIl.

According to AKD Securities however, combined profits in 4QCYI2 clocked in at PkR24.9bn, down 18%QoQ as NIl came off by 2%Q0Q while provisions spiked by 48%QoQ, in line with traditional year-end book cleanups. While AKD Securities expects provisions to be moderate in IHCYI3, NIl may now start to compress swiftly which could lead to a soft 1HCY13. Within this backdrop, AKD Securities believes relative winners can be banks with superior asset quality and/or potential to realized significant capital gains. While AKD Securities has a Market weight stance on Banks, AKD Securities retains a selective preference for UBL, BAFL and ABL.

Big-6: The Big-6 Banks (assets> PkR500bn) posted combined NPAT of PkR95.9bn in CY12, up a modest 9%YoY and accounting for more than 80% of listed commercial bank profits. Although NIl came off by 5%YoY (lower NIMs), earnings growth was propelled by a 31%YoY decline in total provisions and 30%YoY growth in non-interest incoirie (dividends and capital gains). In 4QCY12, combined NPAT came in at PkR21. Obn, down 1 2%QoQ where provisions rose by 53%QoQ (in line with end-of-year trend) while admin expenses also chocked up. UBL and BAFL were outperformers while NBP was a laggard following earnings declining of 5%YoY in CY12.

Medium Banks: Banks (ex-BOP) with PkRl000bn

Small Banks: The S banks (ex-KASBB) with assets c PkRl00bn posted combined NPAT of PkR2.2bn in CY12, down 16%YoY. This was largely due to a high base where SILK recorded sizeable provisioning reversals last year. Despite the decline in earnings, there were improvements – Nil rose by 5%YoY non-interest income jumped by 67%YoY while non-interest expenses rose by a contained 8%YoY.

Outlook: While CY12 was a good year overall for banks, sequential decline in 4QCY12 results may extend into CY13. in this regard, although provisions are likely to be sedate, Nil compression is likely to be swifter. Within this backdrop, AKD Securities believes relative winners can be banks with superior asset quality and/or potential to realized significant capital gains. While AKD Securities has a Market weight stance on Banks, AKD Securities retains a selective preference for UBL, BAFL and ABL.

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