Morning Briefing for January 01, 2014 – Standard Capital

Related Articles

Pak-Afghan Transit Trade decline to $ 1.6 billion: Junaid Makda

December 29, 2017

Pakistan moving forward on path of development: Masood

January 29, 2017

Karachi, January 01, 2014 (PPI-OT): Faysal Bank – Satiating PBV of 0.52x | CY14PE7.5x Core triggers

In the wake of increased minimum deposit rates by SBP @6% and then linking it to repo rate, Standard Capital sees challenges for medium sized banks such as FABL.

According to Standard Capital, however, starting from 1HCY13, Standard Capital sees things settled a bit since core earnings over advances started getting boost due to increase in DR by SBP.

Triggers

Improving CASA deposit mix to increase margins

Higher ADR Ratio:

FABL is focusing on acquisition of low cost deposits in term of Current and Saving Accounts (CASA) spreading branch network and improved CASA mix from 60.9% in December 2013 to 64.2% in September 2013. And Standard Capital sees it will further improve in coming days.

Based on the latest 9MCY13 results FABL has highest ADR ratio of 74% among the other middle tier banks when in other pear’s ADR ratio lies in between 45-50%. But traditionally FABL continued to have higher ADR but focus on CASA has resulted slight betterment in terms of CASA.

Now Standard Capital sees noticeable focus by FABL core banking segment i.e. lending. In the present case lending is being done to good rated corporate since it won’t affect CAR. Moreover, FABL has a in taking exposure in high yielding equities wherein 78% of total investment is placed in AFS.

Deposit mix
With 27% non-remunerative deposits and minimal 5% remunerative deposits FABL is focused on the improving CASA at low cost and channelizing these deposits into advances. Valuation: Improved capital base; PBV 0.52X FABL had passed on bonus issue of 12.5% and met MCR wherein paid up capital reached mandatory Rs10bn. Standard Capital sees FABL to notch Rs1bn NPAT for CY13 in the wake of increase in core earnings and capital gains in equities. Standard Capital sees FABL trending on CY14 PE of 7.5x which is good among middle tier banks. FABL also spell attractive CY14 PBV of 0.52x based on Standard Capital’s anticipated book flow (breakup value) of Rs22/sh. BUY