Equity Analysis /
Egypt

ADIB Egypt: Robust bottom line in Q1; strong balance sheet growth

    Bottom line grew sequentially on lower booked provisions and higher non-interest income; Strong balance sheet growth

    ADIB 1Q19 net profit pre-minority interest and appropriations came in strong at EGP279 million, growing by 28% sequentially and 78% annually with an ROAE of 34%. 1Q2019 results key takeaways were:

    • Despite a fall in treasury exposure to total assets by 360 bps in 1Q19, NIM remained stable sequentially, standing at 6.3%. Net-interest income rose by 2% sequentially.
    • Non-interest income to operating income increased by 517 bps q/q mainly due to higher net fees and commissions (+39% q/q). 
    • OPEX rose sequentially by 29% in 1Q19, at a faster pace than that of operating income which resulted in a higher cost to income ratio, increasing by 7.8%, standing at 51% in 1Q19.
    • Lower booked provisions, falling sequentially by 60%, resulting in a COR of 0.5% in 1Q19, down from 1.4% a quarter earlier, with a decrease in coverage ratio by 12%, recording 141%. Asset quality remained stable, with a slight rise in NPL ratio by 28 bps, standing at 2.5% in 1Q19.
    • Lower effective tax rate, falling by 11% to stand at 29% in 1Q19, down from 40% in 4Q18.

    Balance sheet witnessed a sequential strong growth with gross loans expanding by 10% q/q, versus an average of 8% over the past five quarters, and customer deposits grew by 11% q/q, versus an average of 7% over the past five quarters, bringing Loan-to-Deposit ratio to 71% .

    ADIB is trading at attractive multiples compared to peers, Maintain Overweight on FV of EGP15.10 

    We reiterate our Overweight recommendation on ADIB on FV of EGP15.10/share. The stock is trading at P/E19 of 2.1x, and P/B19 of 0.5x, on ROAE of 34%. Egypt’s sector average P/E19 and P/B19 are 4.8x and 0/9x, respectively.