Morning Briefing for February 06, 2014 – Standard Capital

Karachi, February 06, 2014 (PPI-OT): Allied Bank Limited | EPS Rs 10.46 & cum. DPS Rs 5.75
for CY13 – undervalued as against MCB

The board meeting of Allied Bank Limited (ABL) is scheduled on 11th Feb 2014 to announce financial results for CY13.

According to Standard Capital, they see earnings to decrease by 6.6% YoY and may report NPAT of Rs 10.9bn (EPS Rs. 10.46) for CY13 against Rs 11.7bn (EPS Rs. 11.22) in last year. The earning is expected to decrease mainly due to lowering of lending rates during early part of CY13 and subsequent NIMs during as compared to last year, though bank may have recouped earnings base via gains from equities.

Cumulative cash dividend of Rs 5.75/sh
Cash dividend of Rs 2/sh is also expected for the final quarter which will be additional to Rs 3.75/sh interim cash divided already announced till 9M translating into cumulative Rs 5.75/sh for CY13. This brings the ABL’s dividend yield to 6.6% for CY13.

Core income to remain flat:
Although lower discount rate in CY13 was considered as major constraint for growing banking sector industry but ABL’s strategy to broaden branches network for mobilizing higher deposits and advances is the key trigger to sustain core income which may remain on track. We see ABL to post 18% YoY higher net interest income for CY13. Based on 9MCY13 results, ABL is more towards investment side and has 56.7% investment to deposit and 42.7% ADR ratio

Allied Bank Limited
Profit & Loss
In million Rs             CY12    CY13E
Interest income         49,503    55,044
Interest expense        31,142    33,221
Net Interest Income     18,361    21,823
Non- Interest Income    13,794    11,123
Prov against Loan          651       600
Operating expenses      15,634    16,064
PBT                     15,870    16,282
Taxation                 4,195     5,373
PAT                     11,676    10,909
EPS                      11.22     10.46
DPS                       6.50      5.75
Source: Bank records & SCS Research

Valuation:
ABL is one peer to MCB. ABL deciphers PBV of 1.3x based on expected BV of Rs68/sh – MCB deciphers PBV is 2.5x. Based on peer analysis we still like ABL.