ABL has posted consolidated Q3 19 NPAT of PKR3,395mn (EPS: PKR2.96), up 19% yoy and 8% qoq, taking 9M 19 NPAT to PKR9,637mn (EPS:8.42), down 5% yoy. The result was slightly above our expected EPS of PKR2.77. Similar to most peers, growth in Q3 19 was led by a (i) sharp 29% yoy/10% qoq jump in NII (broadly in line with projections) on margin expansion, (ii) net provisioning reversal of PKR67mn vs. expectation of a net charge, and (iii) robust 15% yoy growth in non-funded income led by higher fee and capital gains. ABL announced a third interim dividend of PKR2.0/sh, taking the 9M 19 payout to PKR6.0/sh.
- ABL posted a strong 29% yoy growth in NII to PKR10,047mn, likely due to margin expansion and possibly some timing differential (Q2 19 NII was unusually low). This is broadly inline with our projected NII of PKR9,859mn.
- ABL posted a net provisioning reversal of PKR67mn, vs. our expectation of a PKR100mn charge. ABL stands out this result season as most peers (including MCB) have reported provisioning charges this quarter.
- Non-interest income rose 15% yoy to PKR2,692mn slightly higher than our projection of PKR2,575mn. This was led by robust 20% yoy growth in fee income and higher than expected capital gains of PKR516mn. These helped offset declines in dividend and FX income.
- Non-interest expenses came in at PKR7,244mn rising 25% yoy, in line with projections. Despite high costs, strong revenue lines have helped reduce the cost/income to 57%, from 60% in the previous quarter.
This is a good result; the NII increase is strong and provisions are still depicting reversals. ABL trades at a CY20f P/B of 0.83x and P/E of 6.1x, respectively, while offering a decent D/Y of c10%. We have a Dec’20 target price of PKR105/sh on the name.
Risks: (i) Weaker-than-expected pick up in NII, (ii) deterioration in asset quality and (iii) failure to control costs (core-admin expense).