JS Securities Limited – JS Research (04-02-2020)

Karachi, February 04, 2020 (PPI-OT): ABL and MEBL CY19 earnings preview

Allied Bank Limited (ABL) is scheduled to announce its CY19 result on February 07, 2020, where 4QCY19 earnings are likely to jump by 38% YoY and 29% QoQ to Rs4.27bn (EPS: Rs3.73).

Alongside the result, we expect a final cash dividend of Rs2.0/share, taking cumulative CY19 dividend to Rs8.0/share.

Meezan Bank Limited (MEBL) is scheduled to announce its CY19 earnings on February 12, 2020. For 4QCY19, we expect earnings to almost double to Rs3.82/share as compared to 4QCY18 earnings.

Alongside the result, we expect final dividend of Rs1.00/share, taking CY19 dividend to Rs4.00/share.

ABL: 4QCY19E EPS at Rs3.73, up 38% YoY

Allied Bank Limited (ABL) is scheduled to announce its CY19 result on February 07, 2020. 4QCY19 earnings for the bank are likely to jump by 38% YoY and 29% QoQ to Rs4.27bn (EPS: Rs3.73), the highest quarterly earnings in the last fifteen quarters. We eye higher quarterly earnings due to core profitability growth as we forecast Net Interest Income (NII) to grow by 35% YoY. On the other hand, we also expect Non Interest Income to increase during 4QCY19 on higher Gain on Sale of Securities driven by recovery in the equity market during the quarter.

For CY19, we expect ABL to post 6% YoY higher earnings of Rs13.68bn (EPS: Rs11.94). ABL’s NII is expected to grow by 27% YoY in CY19 on the back of higher interest rates. However, Non-core Income is likely to decline by 3% YoY on lower income from investments through dividend and gains, given disappointing equity market performance and lower payout from power companies throughout CY19, leading to limited bottom-line growth expectations. Alongside the result, we expect a final cash dividend of Rs2.0/share, taking cumulative CY19 dividend to Rs8.0/share.

MEBL: 4QCY19 EPS expected up 93% YoY at Rs3.82

Meezan Bank Limited (MEBL) is scheduled to announce its CY19 earnings on February 12, 2020. For 4QCY19, we expect earnings to almost double to Rs3.82/share as compared to 4QCY18, which would be the bank’s highest ever quarterly profits. We attribute the surge in earnings to strong growth in both Net Spread earned (+45% YoY) and Other Income (+59% YoY). On the other hand, Operating Expenses are likely to rise by 24% YoY, whereas we expect provisioning expenses to increase by 12% YoY. Everything put together, Cost to Income ratio for the quarter is likely to improve to 43% (-800bps YoY).

Cumulatively for CY19, we expect earnings to record an impressive growth of 76% YoY, clocking in at Rs15.77bn (EPS: Rs12.26), once again at a record-high absolute annual profit. The robust growth is owing to (1) 65% YoY higher Net Spread earned and (2) 21% YoY increase in Other Income. Our earnings projections are higher despite 3x YoY higher provisioning expenses incorporated for CY19. Alongside result, we expect final dividend of Rs1.00/share, taking CY19 dividend to Rs4.00/share.

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