Earnings Report /

Bank Al Habib: 2QCY22 review – Strong base set for swift earnings growth

  • BAHL has posted 2QCY22 EPS of PKR4.19, flat YoY and lower by 6% QoQ

  • Strong Fx gains of PKR2.5bn have led to earnings beat

  • Earnings can grow quickly in the near-term as the higher interest rate environment persists, Buy!

Yusra Beg
Yusra Beg

Senior Investment Analyst

Intermarket Securities
24 August 2022

BAHL has posted 2QCY22 NPAT of PKR4.6bn (EPS: PKR4.19), flat YoY and lower by 6% QoQ. This takes 1HCY22 NPAT to PKR9.6bn (EPS: PKR8.63), up 5% YoY. The result is above our estimated EPS of PKR3.50, with the deviation primarily stemming from higher than expected Fx gains of PKR2.5bn. There was no accompanied interim payout (as expected), with BAHL sticking to its full-year payout policy. 

2QCY22 results highlights:

  • Net interest income came in line with projections at PKR18.2bn – up 13% QoQ and 27% YoY.

  • BAHL has reported a net provisioning charge of c PKR500mn. Similar to peer banks, this could be due to subjective downgrades/ general provisions rather than credit infection.

  • Non-markup income rose by a sharp 98% YoY and 43% QoQ, to PKR6.0bn. This is courtesy sharp rebound in fee (up 42% YoY) and large Fx income of PKR2.5bn (up 4.3x QoQ). These appear to be a function of higher trade volumes and exchange rate volatility.

  • Admin expenses rose by a steep 38% YoY / 12% QoQ to PKR13.2bn –higher than our estimated c. PKR12bn. That said, strong revenues have helped narrow the Cost/Income slightly to 57% vs. 59% in the previous quarter.

  • Effective tax rate is 55% - slightly lower than our estimated 57%.

BAHL continues to maintain an average quarterly EPS run rate of c. +PKR4.0/qtr, a step increase from c. PKR3.0/qtr in the last few years. Earnings can grow quickly in the near-term as the higher interest rate environment persists. BAHL trades at a CY22f P/B and P/E of 3.0x/0.6x where we reiterate our Buy stance with a Dec’22 TP of PKR95/sh.