Karachi October 27, 2021: Bank AL Habib Limited (BAHL) announced its 3QCY21 financial results today wherein the bank reported net earnings of PKR 4.40/share, down 17% YoY. This takes cumulative earnings for 9MCY21 to PKR 12.53/share, up 6% YoY, says Saqib Hussain research analyst at Akseer Research.
The reversal in provisions and lower effective tax rate remained positive support to the bottomline. Net interest income (NII) for the quarter declined 18% YoY to PKR 14.0bn. Interest income shrunk by 8% YoY, while interest expense increased by 3% YoY due to the upward adjustment of an interest rate hike in Sept-21. For 9MCY21, NII remained lower by 6% YoY to PKR 41.4bn.
Non-interest income rose 28% YoY to PKR 3.6bn in 3QCY21 owing to a surge in fee & commission income (+ 34% YoY) and forex income (+44% YoY). Cumulatively, 9MCY21 earnings of the bank improved by 6% where NII dipped 6%, which was more than compensated by 36% higher NFI and reversals in provisions along with lower effective tax rate which stood at 38% compared to 41% of the same period last year.
The bank booked provisioning reversal of PKR 105mn during the 3QCY21, taking cumulative provisioning reversals to PKR 133mn during 9-month period compared to the provisioning charge of PKR 3.4bn in the last year's comparative period.
Operating expenses during 3Q increased by 14% YoY to PKR 9.7bn mainly associated with the higher number of branches on YoY. Resultantly, the cost to income ratio reached 55% in 3QCY21 as against 43% in 3QCY20
The bank's effective tax rate came in at 39% in 3QCY21 compared to 41% in 3QCY20. We have a ‘BUY’ rating on the scrip with a price target of PKR 97/share, which is offering a capital upside of 37%, along with a dividend yield of 9%.
Akseer Price target for Bank Al-Habib Limited (BAHL) has been computed on dividend discounting method using Justified P/B for the calculation of terminal value. We have used sustainable ROE of 17.6% to calculate exit P/B, along with a risk free rate of 11%, beta of 1.0 and market risk premium of 6% to arrive at cost of equity of 17%.
Akseer has a ‘BUY’ recommendation on the stock based on our PT of PKR 97/share which results in an upside of 46% including dividend yield of 9%. Our investment case on BAHL is based on (1) One of the best asset quality amongst the banks (2) higher than industry deposit & advances growth (3) investment book focused on short term instruments.