Earnings Report /
Pakistan

Bank Al Habib: 1QCY22 review – Strong core revenue offset by high admin expenses

  • BAHL has posted inline NPAT of PKR4.9bn (EPS: PKR4.45) in 1QCY22, up 7%yoy and 9%qoq

  • Core revenue is strong, but offset by a sharp increase in admin expenses. Asset quality is robust

  • BAHL trades at a CY22f P/B of 0.7x and P/E of 3.6x, while offering a D/Y of c 10%. Our Dec’22 TP is PKR95/sh. Buy

Raza Jafri
Raza Jafri

Executive Director, Research

Yusra Beg
Yusra Beg

Senior Investment Analyst

Intermarket Securities
19 April 2022

BAHL has posted consolidated NPAT of PKR4.9bn (EPS: PKR4.45) in 1QCY22, up 7%yoy and 9%qoq. The result was inline with our projected EPS of PKR4.40, with higher net interest income and fee being offset by a jump in admin expenses. BAHL did not announce any dividend as historically it announces a full year payout only.

Key highlights include:

  • Strong net interest income of PKR16.0bn, up 22%yoy / 13%qoq with margin expansion likely coming through, on assets re-pricing after the interest rate increases of late CY21.

  • Non-interest income came in at PKR4.2bn, up 29%yoy but down 8%qoq. The sequential decline is due to lower fx income. Core fee continued to impress, registering at PKR2.8bn, up 22%yoy / 3%qoq.

  • Asset quality remains robust with total provisions of just PKR156mn. Even if all of these pertain to the loan portfolio, this represents an annualized cost of risk of less than 10bps.

  • Core admin expenses are up a sharp 25%yoy to PKR11.7bn. This follows the bank increasing its branch network by 13% in CY21 to more than 920 (it has recently crossed the 1,000 branch mark). As a result, the Cost/Income has risen to 58% vs. 55% in the previous quarter.

BAHL’s revenue growth is impressive, and should sustain in the near-term given the 250bps interest rate hike in April 2022. Fee income is also performing well. However, the elevated costs are taking the sheen off results and preventing positive earnings surprises from coming through. BAHL trades at a CY22f P/B of 0.7x and P/E of 3.6x, while offering a D/Y of about 10%. Our Dec’22 TP is PKR95/sh.