Bottom line fell sequentially on higher booked provisions; healthy balance sheet growth
ADIB 3Q19 net profit pre-minority interest and appropriations came in line with our expectations at EGP308 million, falling by 19% sequentially and growing by 21% annually with an annualized ROAE of 32%.
- Treasury exposure to total assets dropped sequentially by 150 bps, recording 28.2% in 3Q19, and thus NIM weakened sequentially by 9 bps, standing at 6.8%. Net-interest income rose by 2% q/q.
- Non-interest income to operating income stabilized at 18%, mainly due to the similar increase in non-interest income ( +2% q/q).
- OPEX declined sequentially by 12% in 3Q19, while operating income rose by 2%, resulting in a drop in the cost to income ratio, improving by 6.6 pps, standing at 39% in 3Q19.
- Higher booked provisions, surging sequentially by 446%, resulting in a COR of 2.1% in 3Q19, up from 0.4% a quarter earlier, with an increase in coverage ratio by 9.4pps, recording 120%. Asset quality stabilised at an NPL ratio of 3.1%.
- Higher effective tax rate, increasing by 3.9 pps to stand at 27% in 3Q19, up from 23% in 2Q19.
- Balance sheet witnessed sequential healthy growth with gross loans expanding by 6% q/q, versus an average of 7% over the past four quarters, and customer deposits grew by 4% q/q, versus an average of 6% over the past four quarters, bringing Loan-to-Deposit ratio to 74% .
ADIB is trading at attractive multiples; maintain Overweight
We reiterate our overweight recommendation on ADIB on FV of EGP15.10/share. The stock is trading at P/E 2020 of 2.0x, and P/B 2020 of 0.4x, on ROAE of 26%. Egypt’s sector average of P/E 2020 and P/B 2020 are 4.1x and 0.8x, respectively.