Karachi, October 23, 2013 (PPI-OT): MCB: 3QCY13 earnings PKR 5.2/share down by 14% QoQ On a standalone basis, for the 3QCY13, Arif Habib Limited estimates MCB to post in earnings of PKR 5.2/share versus PKR 6.0/share in the prior period last year.
According to Arif Habib Limited This brings the 9MCY13 cumulative EPS to PKR 16.9 versus PKR 16.4 up by 4% YoY.
MCB - Financial Highlights PKR mn 3QCY13 2QCY13 QoQ 9MCY13 9MCY12 YoY Interest Income 8,944 9,087 -2% 27,754 31,241 -11% Non-Interest Income 2,325 3,492 -33% 8,168 6,933 18% Total Income 11,270 12,579 -10% 35,921 38,174 -6% Operating Expense 3,775 4,030 -6% 12,042 12,847 -6% Provisions (210) (474) (1,525) 54 Pre-tax Profits 7,704 9,023 -15% 25,404 25,274 1% Tax 2,449 2,903 8,262 8,721 Post-tax Profits 5,255 6,119 -14% 17,143 16,553 4% EPS (PKR) - entity 5.2 6.0 16.9 16.4 Source: Company accounts and AHL Research
3Q earnings to take hit on falling non/interest income
Following the NIM compression – higher cost of deposit combined with policy rate cut – banks’ interest income should remain rather flattish, Arif Habib Limited estimates. However, relative to interest income banks’ non-interest income can see a sharper decline QoQ – one-off proceeds of PKR 800mn from Unilever buyback early in 2QCY13.
Cutting down aggressively on operating expenses
Nevertheless, with nearly all banks, adjusting to low interest income environment have started to seek in additional earnings from cutting overall operating expenses. For MCB, Arif Habib Limited estimates operating expenses are likely to trim down further to a PKR 3,775mn a decline of 6% QoQ.
Aggressive deleveraging of funding book
So forth, the bank in 1HCY13 has booked in a provisioning reversal of PKR 1,135mn. In addition Arif Habib Limited estimates banks infection ratio to remain little changed at ~10%, but coverage ratio will likely increase to 88% from 86% last quarter.
NBP: 3QCY13 earnings PKR 1.6/share up by 16% QoQ
For National Bank of Pakistan (NBP) Arif Habib Limited sees 3QCY13 earnings slightly notching up by 8% QoQ to PKR 1.6/share versus PKR 1.4/share, bringing the 9MCY13 cumulative EPS to PKR 4.5 compared to PKR 5.8 in 9MCY12.
NBP - Financial Highlights PKR mn 3QCY13 2QCY13 QoQ 9MCY13 9MCY12 YoY Interest Income 11,052 11,194 -1% 31,077 30,913 1% Non-Interest Income 7,135 7,408 -4% 20,130 15,879 27% Total Income 18,187 18,602 -2% 51,207 46,792 9% Operating Expense 11,858 8,687 37% 29,438 24,281 21% Provisions 2,394 6,228 -62% 9,832 4,926 100% Pre-tax Profits 3,935 3,687 7% 11,937 17,584 -32% Tax 469 698 2,451 5,266 Post-tax Profits 3,466 2,989 16% 9,486 12,319 -23% EPS (PKR) - entity 1.6 1.4 4.5 5.8
Interest income to stay relatively unchanged
As of 2HCY13 the bank’s interest income has shielded off relatively well, considering the NIM squeeze. Overall Interest income declined by 5% YoY compared to an industry average of 8% YoY. For 3QCY13, Arif Habib Limited estimates a similar story going forward. Total interest income is likely to taper off by 1% to PKR 11,052mn.
Provisioning to square out overall interest gains
However, this came at a cost of higher provisioning expense, charging PKR 7.4bn in 2HCY13 provisioning expense compared to PKR 3.3bn in corresponding period last year. In 3QCY13, Arif Habib Limited estimates a provisioning charge of PKR 2.8bn, assuming an increased coverage ratio of 86% and slightly higher infection ratio of 13.1% during the quarter. In addition Arif Habib Limited estimates higher operating cost to further drag the bank’s profitability.
MCB at current levels Arif Habib Limited Arif Habib Limited maintain ‘HOLD’ stance with a target price of PKR 247/share and CY13E PER and P/B of 12.7x and 2.3x respectively. In addition the bank has paid a dividend of PKR 7.00/share in 1HCY13. Arif Habib Limited expects the bank to pay another PKR 3.5/share in 3QCY13. For CY13E this brings total dividend payout to PKR 13.5/share, thus offering a dividend yield of 5%.
For NBP Arif Habib Limited are currently in process of reviewing Arif Habib Limited full’s year earnings and valuation.