Karachi, February 14, 2014 (PPI-OT): Bank to post PKR 3.8/share earnings in 4QCY13, +13%YoY
UBL is scheduled to announce CY13 earnings on 19th Feb, 2014.
According to Arif Habib Limited, for the quarter Arif Habib Limited expects the bank to post earnings of PKR 3.8/share (+13%YoY), bringing the full year earnings to PKR 14.3/share (-3%YoY).
PKR 2.0/share final cash dividend
The bank has so far paid an interim dividend of PKR 6.0/share (1H 40%, 3Q 20%). Maintaining a healthy payout of 57%, Arif Habib Limited expects another PKR 2.0/share dividend with the results, bringing the total DPS of PKR 8.0/share, offering a decent dividend yield of 6% at current levels.
UBL: Financial Highlights’
PKRmn 4QCY13E 4QCY12A YoY CY13E CY12A YoY
Mark-up Income 9,185 9,475 -3% 36,546 38,560 -5%
Non Mark-up Income 4,577 3,965 15% 17,829 17,131 4%
Total Income 13,761 13,440 2% 54,375 55,691 -2%
Op. Expense 6,598 6,385 3% 26,380 24,525 8%
PPOP 7,163 7,055 2% 27,994 31,166 -10%
Provisions 210 931 -77% 1,678 4,137 -59%
Tax 2,339 2,034 15% 8,767 9,022 -3%
Post-Tax Profits 4,613 4,090 13% 17,549 18,007 -3%
EPS (PKR) 3.8 3.3 14.3 14.7
DPS (PKR) 2.00 2.00 8.00 8.00
- – – -
Cost / Total income 48% 48% 49% 44%
Mark-up / Total Income 67% 70% 67% 69%
Non-Mark-up /Total Income 33% 30% 33% 31%
PPOP / Share 5.9 5.8 22.9 25.5
Source: Financial accounts, AHL Research
Core income to decline following NIM compression
For the quarter Arif Habib Limited estimates the bank’s NIM to contract by 15bps YoY, resulting in a 3%YoY contraction in mark-up income. Arif Habib Limited says this primarily based on 51bps decline in industry Weighted Average Lending and Deposit spread to 6.15% in 4QCY13 versus 6.66% last year same quarter. In addition, bank’s declining current account deposits (34% by Sep-13 versus 36% by Dec-12), is likely to keep bank’s cost of deposit high during the 4QCY13.
Non-income and operating expense to increase
With the slight bearish NIMs profile, bank’s non mark-up income is estimated to go up. Increased remittances receipts, general banking transaction and FX activity gains, should augur well for total revenue growth (+2%YoY). While, provisioning is expected to decline and operating expenditures are estimated to stay flattish (cost-to-income ratio + 48% in Dec-13).
Improving fundamentals justify higher PB multiples
With an estimated bank’s CY13E BV of PKR 81/share, the bank is trading at multiples of 1.6x P/BV and PER of 9.3x. Arif Habib Limited’s target price for the said scrip is PKR 157/share offering in +18% upside from current closing price of PKR 134/share; hence we maintain a ‘Buy’ call on UBL.