Equity Analysis /

Habib Bank: HABIB BANK: Targeted layoffs could lower costs, raise earnings

    Rohit Kumar
    Rohit Kumar

    Global Financials/Thematics

    Tellimer Research
    28 December 2017
    Published byTellimer Research
    HBL reportedly undergoes downsizing. Unconfimed news reports indicate HBL laid off c180 employees at the end of last week; most were aged 45-52. As per the reports, another 2,000 employees could face the same fate (total headcount was 17,303 at end-2016). We believe a significant cost-rationalisation exercise could potentially raise earnings by PKR2.5 per share, thereby lowering 2018f P/E from 7.3x to 6.6x, making HBL the cheapest Pakistan bank in our universe. We keep our model unchanged, pending confirmation of the reports, and present a sensitivity analysis in Table 1.