Profits grow sequentially on strong margins and controlled opex; and annually on lower provisions and effective tax rate; LDR improves
CIB 3Q21 net profit recorded a robust EGP3.8 billion (+19% q/q, +62% y/y), which 18% higher than our estimates for the quarter of EGP3.2 billion, bringing 9M21 bottom line to EGP9.9 billion.
Sequential expansion mainly came on the back of strong margins and controlled opex, while the bank continued to book adequate provisions with an improved NPL ratio.
Annual expansion came on the back of: 1) robust non-interest income, 2) lower provisions, and 3) lower effective tax rate despite higher OPEX and flat topline.
It was a good quarter for lending activity as it expanded by 6% q/q mainly driven by the corporate segment, bringing YTD growth to 16%. Deposits expanded by 5%, bringing YTD growth to 18.5%, pushing the LDR ratio to 39% (+51 bps q/q).
3Q21 results key takeaways were:
Net interest margin(NIM) strengthened to 6.0% (+20 bps q/q) on higher treasury exposure recording 45% of total assets (+2.3 pps q/q) and lower cost of funds as CASA stood at 54% of total customer deposits.
Non-interest income failed to provide support as investment income declined despite healthy growth of fees and commissions income. Thus, non-interest income to operating income waned to stand at 12.8% in 3Q21 (-70 bps q/q).
Efficiency improved where the cost to income ratio recorded 24%, as operating income grew by 6% q/q against a decline in operating expenses by 15% q/q.
Provisions coverage increased to 206% ( +2.2 pps q/q) as a result of a lower non-performing loans ratio of 5.4% (-0.3 pps q/q) against a lower Cost of Risk of 0.8% (-0.1 pps q/q) versus an average of 2.8% over the past four quarters.
Effective tax rate recorded 29% (-1.0 pps q/q) versus an average of 31% over the past four quarters.
Lending activity expanded by 6% q/q mainly driven by the corporate segment, bringing YTD growth to 16%. Deposits expanded by 5%, bringing YTD growth to 18%, pushing the LDR ratio up to 39% (+51 bps q/q) as of Sep-end 2021.
CAR strengthened to stand at 32% (+8 bps) as of Sep-end 2021.
COMI trading at multiples below its historical norms
The stock is trading at P/E 2022of 8.1x and P/B 2022 of 1.3x. P/B is below its historical average P/B of 2.7x between 2004-2021. Egypt banking sector average multiples stand at 4.6x P/E 2021 and 0.6x P/B2021.
We are currently updating our estimates for 2022 onward to match the bank's latest developments.