Bank AL Habib – 1Q2016 EPS likely at Rs1.86 +29% Year on Year – ‘Buy’

Report by JS Global Research

• Bank Al Habib Limited (BAHL) is scheduled to announce its 1Q2016 earnings on April 14, 2016 where we expect the bank to report 29% YoY higher earnings of Rs2.07bn (EPS Rs1.86).
• We expect earnings growth to stem from (1) 8% YoY higher Net Interest Income (NII) and (2) 80% YoY lower provisioning expenses. Fee Income is also expected to grow by 10% YoY.
• We presently have a ‘Buy’ rating on BAHL with a Target Price of Rs55. At current levels, BAHL trades at 2016E P/B of 1.11x and offers a 2016E dividend yield of 8%.
• BAHL remains one of our preferred plays in mid-tier Pak Banks given (1) an attractive D/Y, (2) better asset quality, (3) higher-than-industry deposit growth and (4) longer PIB duration amongst mid-tier banks.

Bank Al Habib Limited (BAHL) is scheduled to announce its 1Q2016 earnings on April 14, 2016 where we expect the bank to report 29% YoY higher earnings of Rs2.07bn (EPS Rs1.86) on the back of

(1) 8% YoY higher Net Interest Income (NII) and

(2) 80% YoY lower provisioning expenses.

NII is expected to improve due to higher income contribution from loans as the bank also managed to register a higher deposit growth via peers thanks to expansion in branch network during 2015. That said expansion in branch network is likely to result in 16% YoY higher Operating Expenses. Meanwhile, Fee Income is also expected to grow by 10% YoY.

Alongside result, we do not expect any cash payout.

Reiterate ‘Buy’ with a Target Price of Rs.55

We presently have a ‘Buy’ rating on BAHL with a Target Price of Rs55. At current levels, BAHL trades at 2016E P/B of 1.11x and offers a 2016E dividend yield of 8%. BAHL remains one of our preferred plays in mid-tier Pak Banks given

1. attractive dividend yield,
2. better asset quality,
3. higher-than-industry deposit growth and
4. longer PIB duration amongst mid-tier banks.