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Karachi: Allied Bank Ltd (ABL) is scheduled to announce its 9MCY11 result tomorrow. On a consolidated basis, AKD Securities expects ABL to post NPAT of PkR7.74bn (fully-diluted EPS: PkR8.99) in 9MCY11 against NPAT of PkR5.89bn (fully-diluted EPS: PkR6.84) in 9MCY10, translating into a robust growth of 31%YoY.
According to AKD Securities, since ABL has already announced a cash payout alongside 1HCY11 results, AKD Securities does not expect any payout alongside upcoming results. Key highlights of 9MCY11 results are expected to be 1) 13%YoY Nll growth primarily due to growth in earning assets, 2) a 34%YoY decline in loan provisions due to contained NPL formation, 3) strong 25%YoY non-interest income growth and 4) 18%YoY increase in admin expenses. On a sequential basis, 3QCY11 consolidated NPAT is projected at PkR2.67bn (fully-diluted EPS: PkR3.10), up 5%QoQ where capital gains could be a key swing factor.
In this regard, AKD Securities estimates that ABL’s unrealized stock of capital gains could have exceeded PkR4bn by Sep 30’ll with a further unrealized gain of PkR1.3bn in 3QCY11 alone (ABL maintains a sizeable strategic stake in FFC which has been the best performing stock in the Pakistan Market CYTD). AKD Securities estimates that 3QCY11 gains could have added PkR1.5/share to ABL’s book value. ABL trades at a CY12F P/B of 1.16x and PER of 5.30x. At current levels, AKD’s target price of PkR75.5/share offers upside of 16%. Accumulate.
CA deficit doubles in 1QFY12
According to the latest data released by SBP, the 1QFY12 Current Account deficit doubled to US$1,209mn as compared to US$597mn in the corresponding period last year. In this regard, the CA deficit for Sep’11 has clocked in at US$908mn against a deficit of US$2O1mn in Aug’11, increasing by a sizeable 4.5xMoM.
The expansion in the CA deficit was primarily due to widening of the trade deficit (goods & services) which reached US$4.7bn in 1QFY12 (up 28%YoY) as total export growth of 17%YoY was superseded by 24%YoY total import growth. The latter can be attributed to a high oil import bill due to seasonal demand. At the same time, following the Ramadan spike, Sep’11 remittances have registered at US$890mn, down 3%YoY and 32%MoM. Going forward, risks exist in terms of 1) the Sindh floods which could lead to the FY12 GDP growth target of 4.2% being missed, 2) lower cotton prices and subdued global growth dynamics which could stall export growth and 3) sticky Arab Light price which could keep the import bill high.
If the trend in CA deficit persists throughout the year, the full-year FY12 deficit may exceed AKD’s initial estimates of 1% of GDP. Considering IMF/Paris Club repayments in Feb’12 coupled with bleak external financing options, there is clearly less room for complacency on the BoP front. As a result, AKD Securities cautions that the recent bout of monetary easing could prove to be transitory while a return to IMF in the near to medium term remains a tangible possibility.