JS Securities Limited – Morning Briefing

Karachi, April 17, 2019 (PPI-OT): UBL and MCB earnings preview

United Bank Ltd (UBL) is scheduled to announce its 1QCY19 results on April 24, where we expect the bank to report a PAT of Rs3.12bn (EPS Rs2.55), reflecting a growth of 12% YoY.

Alongside result, we expect the bank to announce first interim cash dividend of Rs3/share.

MCB Bank (MCB) is also scheduled to announce its 1QCY19 results on April 24. We expect MCB to announce earnings of Rs3.71/share, down 6% YoY, along with first interim cash dividend of Rs4/share.

However, we expect the bank’s double-digit growth trajectory to continue on its core income given higher asset base growth.

UBL: 1QCY19E earnings to grow on higher expense base

United Bank Ltd (UBL) is scheduled to announce its 1QCY19 results on April 24, where we expect the bank to report a PAT of Rs3.12bn (EPS Rs2.55), reflecting a growth of 12% YoY. We anticipate higher effective tax rate for UBL during 1QCY19 owing to additional Super Tax on CY17 profits (applicable to all banks) , resulting in tax expenses to grow by 3x YoY, our estimated earnings reflect a growth owing to (1) expected YoY lower provision expenses and (2) one-time pension cost amounting to Rs6.4bn (Rs3.2/share after tax) booked during 1QCY18. We expect the bank’s Net Interest Income (NII) to report a limited growth of 3% YoY, while Non-Interest Income is likely to decline by 31% YoY as we do not expect hefty capital gains similar to 1QCY18. On a sequential basis, earnings are projected to decline by 46% QoQ, as the bank had booked reversals on account of WWF during 4QCY18. Alongside result, we expect the bank to announce first interim cash dividend of Rs3/share.

MCB: Double-digit growth in NII to continue in 1QCY19E

MCB Bank (MCB) is also scheduled to announce its 1QCY19 results on April 24. We expect the bank’s double-digit growth trajectory to continue on its core income given higher asset base growth. We also expect reversals under provisioning expenses to continue during 1QCY19 given recoveries from NIB Bank’s NPL book. Furthermore, absence of pension costs booked during 1QCY18 would further support the bank’s growth in profits. Consequently, we expect Profit Before Tax to witness 26% YoY growth. However, on account of higher effective tax rate led by additional Super Tax on CY17 profits, the bottom-line is likely to shrink. We expect MCB to announce earnings of Rs3.71/share, down 6% YoY, along with first interim cash dividend of Rs4/share.

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