AKD Quotidian about — MCB: Kicks off banking sector results next week

Karachi, January 30, 2013 (PPI-OT): Banking sector result season kicks from next week with MCB scheduled to announce its full-year CY12 result on Feb 7’13.

According to AKD Securities, on a consolidated basis, AKD Securities expects MCB to post NPAT of PKR 22.36 billion (EPS: PKR 24.30) in CY12, translating into 16%YoY growth. Alongside the result, AKD Securities expects MCB to announce a final dividend of PKR 4/share, bringing full- year dividend to PKR 14/share (payout ratio: 58%), as well as a 10% bonus issue. MCB trades at a CY13F P/B of 1.65x and P/E of 8.9x where AKD Securities’ target price of PKR 185/share implies downside of 12% and therefore a Reduce stance. That said, the scrip could potentially rally in the run-up to result announcement. In this regard, since 2005, the listed Banking sector has given an average return of 16.5% in the Jan-Mar quarter, coinciding with full-year results announcement, and being the best quarter in terms of price performance. While the larger banks have initiated interim dividend payouts, AKD Securities still expects full-year banking results to excite.

MCB Result Preview: MOB is scheduled to announce its full-year CY12 result on Feb 7’13. On a consolidated basis, AKD Securities expects MCB to post NPAT of PKR 22.36 billion (EPS: PKR 24.30) in CY12, translating into 16%YoY growth. Alongside the result, AKD Securities expects MCB to announce a final dividend of PKR 4/share, bringing full-year dividend to PKR 14/share (payout ratio: 58%), as well as a 10% bonus issue. Key drivers of profitability in CY12 are expected to be 1) a 90%YoY decline in provisions, 2) 24%YoY increase in non-interest income buoyed by capital gains and 3) a strong share of profit from associate AICL vs. a loss last year. Moreover, AKD Securities expects overall non- interest expenses to be slightly lower, partly due to a high base. In 4QCY12, AKD Securities expects MCB to post flattish NPAT of PKR 5.41 billion (EPS: PKR 5.89) where AKD Securities expects MCB to partially utilize balance of unrealized capital gains to make up for likely lower Nil caused by NIM compression.

The full-year rally? MCB trades at a CY13F P/B of 1 .65x and P/E of 8.9x where AKD Securities believes that MCB will struggle to post growth next year in the absence of any reduction/elimination of the rate floor on savings a/c. That said, MCB may potentially continue to rally in the run-up to result announcement, inline with precedence where banks tend to post their best price performances in the Jan-Mar quarter. In this regard, based on data since 2005, the listed banking sector has on average returned 16.5% in the first quarter of the calendar year, coinciding with full-year results announcement. Simply put, the Jan-Mar quarter is the best time to be holding banking shares where AKD Securities does not expect this time to be any different. AKD Securities recommends investors to hang onto MOB (target price: PKR 185/share) for now but to seek an exit post result announcement since 2013 is shaping up to be a soft year for banks’ earnings.

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