Result Previews

Research Entity Notification Number: REP-005

ABL and MCB

Monday February 06, 2017

ABL - OVERWEIGHT

ABL: CY16 EPS estimated at PKR13.8, up 3%YoY

Target Price: PKR 132 Current Price: PKR 113 ABL Performance 1M

3M

12M

Absolute %

-7%

10%

29%

Relative to KSE %

-7%

-9%

-26%

Bloomberg

ABL.PA

Reuters

ABL.KA

MCAP (USD mn)

1,237

12M ADT (USD mn)

0.4

Shares Outstanding (mn)

1,145 Source: PSX, BMA Research

MCB: CY16 EPS estimated at PKR20.9, down 9%YoY

MCB - OVERWEIGHT Target Price: PKR 248 Current Price: PKR 238 UBL Performance 1M

The Board of Directors of Allied Bank Limited (ABL) is scheduled to meet on 9th Feb’17 to consider the financial results for CY16. We preview the bank to post earnings of PKR15.7bn (EPS: PKR13.8), depicting a growth of 3%YoY. The growth in earnings is expected due to i) ~2%YoY growth in Net Interest Income (NII) after provisions on the back of absence of one-off impairment loss taken in 4QCY15 and ii) ~ 13%YoY jump in Non Funded Income (NFI) on the back of higher capital gains. On the other hand, 8%YoY jump in administrative expenses is expected to contain the full scale growth in earnings during CY16. On sequential basis, earnings are expected to remain flat as a decline in NII (due to absence of support from high yielding PIBs) will be offset by higher dividend income during the quarter. To note, ABL was unable to realize dividend income from IPPs (HUBCO and KAPCO in particular) during 3QCY16. We expect the bank to maintain a higher payout of PKR2.0/sh in 4QCY16 owing to its comfortable CAR ratio, taking the total payout during CY16 to PKR7.0/sh. The bank currently trades at CY17F P/B and P/E multiples of 1.3x and 7.5x (26% discount to top 3 banks), respectively. We currently have an Overweight stance on the scrip with a TP of PKR132/sh, offering a total return of 24% on the last closing.

3M

12M

Absolute %

-3%

10%

26%

Relative to KSE %

-3%

-9%

-29%

Bloomberg

MCB.PA

Reuters

MCB.KA

MCAP (USD mn)

2,529

12M ADT (USD mn)

7.0

Shares Outstanding (mn)

1,113 Source: PSX, BMA Research

The Board of Directors of MCB Bank Limited (MCB) is scheduled to meet on 8th Feb’17 to consider the financial results for CY16. We preview the bank to post earnings of PKR23.3bn (EPS: PKR20.9), depicting a decline of 9%YoY. The result announcement is also expected to accompany a final cash dividend of PKR4.0/sh, taking the total payout during CY16 to PKR16.0/sh. The decline comes on the back of i) ~8%YoY decline in Net Interest Income (NII) after provisions owing to limited growth in advances, waning support from PIBs and lower quantum of provisions reversal, ii) ~1%YoY decline in Non Funded Income (NFI) on the back of high base effect from capital gains realized in CY15 and iii) 69%YoY lower other income. On sequential basis, the earnings are expected to post a decline of 13%QoQ largely on the back of i) lower capital gains realized (down 21%QoQ) and ii) 6%QoQ jump in operational expenses. The bank underperformed the banking sector by 27% during CY16 as i) limited loan book growth and ii) lack of innovation to support fee and commission income dissuaded investors. However, MCB’s merger with NIB may be a significant growth trigger for the bank going forward where the bank could potentially exploit synergies to increase its footprint and take advantage of tax losses. We currently have an Overweight stance on the scrip with a TP of PKR248/sh, offering a total return of 11% on the l