Bank Al-Habib Limited (BAHL): Banking on Superior Asset Quality! We initiate coverage on Bank Al-Habib Limited (BAHL) with a TP of PKR60/sh, offering an upside of 25% on last closing. Our conviction on the stock stems from i) a healthy CAGR of 18% in NII between CY14F-CY17F, ii) 3 year CAGR of 13% in the non funded income between CY14F-CY17F and iii) muted provisioning expense due to impressive asset quality. Resultantly, we expect the bank to post strong earnings growth of 29%YoY in CY14F at PKR6.65bn (EPS: PKR5.97) as against earnings of PKR5.15bn (EPS: PKR4.62) in CY13. Going forward, we expect growth momentum in earnings to continue with CY14F-CY17F earnings CAGR of 11%. BAHL is also expected to park PKR142bn in high yielding PIBs by Dec’14 thereby locking in higher returns thus keeping the NII of the bank robust. Also given the ultra conservative lending approach (gross ADR: 41% in 9MCY14) that the bank adheres to and resultantly impressive book quality (infection ratio 2.35%), we expect the provisioning expense of the bank to remain muted. Finally, with a CAR ratio of 14.6% against statutory requirement of 10%, we expect the bank to maintain its payout profile where we have assumed the bank to maintain a long term payout of ~45%. At current levels, the scrip trades at a forward P/E and P/B of 8.0 and 1.72, respectively. (Detailed report to follow shortly) Report by: Jehanzaib Zafar BMA Capital Management Ltd.
Posted on: Wed, 24 Dec 2014 11:51:40 +0000
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