Skip to Content

Wednesday, August 23rd, 2017

AKD Quotidian about — NBP: Discounted pricing balanced by low ROE

Be First!
by March 15, 2013 Brokerage

Karachi, March 15, 2013 (PPI-OT): AKD Securities updates financial model for NBP post release of CYI2 accounts whereby AKD Securities targets price inches up to PkR57.SOfshare (PkR48.50/share after XDXB).

According to AKD Securities expects NBP to eke out marginal growth in CY13F, although prospects for positive earnings surprises remain if sizeable capital gains backlog (PkRB.3bn on domestic equities mutual fund units) is realized. While asset quality metrics appear to have improved (NPL ratio down to 12.2% with coverage at 82%), this is partly due to contrarian 25%YoY loan growth in CYI2. At the same time, the Cost/Income ratio has deteriorated to 54%, the highest in the last 10 yrs. In sum, while NBP trades at enticing valuations (CYI3F P/B: O.6x, PIE: 5.6x) AKD Securities believes this is largely balanced by the lowest ROE within peer group at less than 12%. AKD Securities revised TP of PkR57.5/share offers modest 9% upside.

CY12 Result Review: On a consolidated basis, NBP posted NPAT of

PkR16.Sbn (EPS: PkR9.O8) in CY12, down 5%YoY on the back of a 6%YoY decline in NIl (tighter NIMs), 15%YoY increase in LLPs and steep 19%YoY increase in non-interest expenses. These combined to counter a 72%YoY decline in impairment and strong 26%YoY non-interest income growth, primarily driven by fees, capital gains and associates profits. Alongside the result, NBP announced a cash dividend of PkR7lshare and 15% bonus issue.

Higher coverage but pressure point remain: While NPL stock has

rerriained flat at PkRSYbn (NPL ratio down to 12.2%; coverage up to 82%), risks to future credit costs remain in view of 1) high 25%YoY loan growth, primarily to GoP backed entities but also to the Individuals’ category where overall macros still remain sluggish, 2) gradual expiration of legacy FSV benefit (net of tax: PkR435bn) and 3) potential provisions for certain corporates if SBP relaxations expire. These could keep credit costs relatively high over the medium-term.

Non-funded franchise is a strength: With the sector lacing the prospect of gradually declining NIMs over the medium-term, banks will likely come to increasingly rely on non-interest income. In this regard, NBP’s status as the GoP’s treasurer allows It one of the strongest fee income franchises in Pakistan even as the GoP has reduced commission rates recently. Moreover, NBP retains a sizeable backlog of capital gains – PkR8.3bn on domestic stocks/mutual fund units and PkR1 1 .4bn on a foreign investment – where judicious realization can lead to positive earnings surprises over the next few years.

Investment Perspective: While NBP trades at enticing valuations (CY13F P/B: O.6x, PIE: 5.6x) AKD Securities believes this is largely balanced by the lowest ROE within peer group at less than 12%, punctuated by a Cost of income ratio of 54%, the highest in 10 yrs. As a result, although AKD Securities revised TP of PkR57.5/share offers modest 9% upside, AKD Securities retains preference for private sector peers such as UBL, BAFL and ABL.

NBP: Valuations

Year End Dec 31 CYI2A CY13F CYI4F CYI5F
EPS (PkR) 9.08 9.39 10.55 11.18
EPS Growth -5% 3% 12% 6%
PER (x) 5.81 5.61 5.00 4.71
Total BVPS (PkR) 84.42 85.61 90.58 95.78
FIB Total BVS (x) 0.62 0.62 0.58 0.55
Loan to Deposit Ratio 64% 61% 59% 60%
NIMs 4.77% 4.29% 4.64% 4.58%
Market Cap to Deposits 9.4% 9.4% 8.3% 7.5%
Cost/Income Ratio 54% 57% 56% 55%
Tier-I ROAE 14.5% 14.2% 152% 15.3%
Total Equity ROAE 11.5% 11.0% 12.0% 12.0%
ROAA 1.36% 1.26% 1.29% 1.23%
Dividend per Share (PkR) 7.00 7.00 7.50 8.00
Dividend Yield 13.28% 13.28% 14.23% 15.18%

Source: Co. Reports and AKD Research

NBP: Income Statement

(EkRmn) 4112A NYIOF EP14E 441SF
Interest Earned

101,126

105,778

127,911

135,726

Interact Expensed

56,652

60,854

71,217

76,401

Net interest Income

44573

44,925

56,694

59,324

Provisions

8,019

6,665

7,821

6,613

Post Provisioning Nil

36,524

38,260

48,873

52,711

Non-Interest Income

24.805

26,624

25,141

26,832

Non-Interact Expense

37,295

40,983

46,048

49,927

PENT

24.060

20,901

27,665

29,616

NEAT

16,887

17,766

12,211

22,783

Source: Co. Reports and AKD Research

NBP: Balance Sheet

(PkRmn) CYI2A CYI3F CYI4F CYI5F
Investments

342,965

394,116

462,535

485,456

Net Advances

661,345

710,247

771,102

875,087

Total Assets

1,316160

1,444,865

1,591,680

1,761,835

Deposits

1,038,095

1,173,462

1,301,799

1,452,133

Total Liabilities

1,159,982

1,286,479

1,424,105

1,584,633

Net Assets

156,178

158,386

167,575

177,202

Tier-I Equity

119,435

125,198

131,920

138,893

Total Tier II Equity

36,743

33,188

35,656

38,308

Total Equity

156,178

158,386

167,575

177,202

Total SHEG and Liabilities

1,316,160

1,444,865

1,591,680

1,761,635

Source: Co. Reports and AKD Research

Previous
Next

Leave a Reply