Earnings Report /

Bank Al Habib: 3QCY22 Review: Growth remains intact, inline

  • BAHL has posted 3QCY22 EPS of PKR4.89, up 10%YoY and 17%QoQ - inline.

  • Strong revenues offset a high provisioning charge of PKR1.8bn - likely a subjective downgrade

  • BAHL is the top banking play in a high interest rate setting

Yusra Beg
Yusra Beg

Senior Investment Analyst

Intermarket Securities
27 October 2022

BAHL has posted 3QCY22 NPAT of PKR5.4bn (EPS: PKR4.89), up 10%YoY and 17%QoQ. This takes 9MCY22 NPAT to PKR15.0bn (EPS: PKR13.52) up 7%YoY. The result is inline with our estimated EPS of PKR5.0. Key result highlights include a high provisioning charge of PKR1.8bn (vs. an estimated PKR600mn) and high admin expenses (up 46%YoY crossing PKR14bn) – both of which were offset by strong revenue growth and high Fx income (PKR2.6bn). BAHL pays out dividend on a full year basis. 

3QCY22 Results Highlights:

  • Net interest income came in line with projections at PKR20.4bn – up 12% QoQ and up 46%YoY on strong margin expansion amid asset repricing.

  • BAHL has reported a large provisioning charge of PKR1.79bn vs. PKR498mn in 2Q and a reversal of PKR90mn SPLY. However, this is likely a subjective downgrade/ general provision rather than pure credit infection, in our view.

  • Non-markup income rose by a sharp 68%YoY and 3%QoQ, clocking in at PKR6.2bn. This is courtesy sharp rebound in fee (up 24%YoY) and large Fx income of PKR2.5bn (similar to 2Q) – both of which have resulted from an improved trade positioning/volumes and exchange rate volatility in case of the latter. Additionally, BAHL reported nominal capital gains of PKR8mn.

  • BAHL’s costs are growing swiftly – core admin expense up 46%YoY and 6%QoQ to PKR14.0bn – inline with estimates. Cost/Income remains at a high 57% (same as 2Q) and even higher than 55% SPLY.

  • Effective tax rate is 49% – inline with estimates and lower than 55% in the previous quarter (which included an element of retrospective ADR related tax).

BAHL’s growth strategy remains intact which is evident from rising costs – but superior balance sheet positioning and sensitivity to high interest rates puts BAHL in the top banking plays. BAHL trades at a CY23f P/B and P/E of 0.5x/2.2x where we reiterate our Buy stance with a TP of PKR90/sh.