Morning Briefing for Mar 07, 2012 – Standard Capital

Karachi: Standard Chartered Bank in limelight

We initiate our coverage on Standard Chartered Bank (Pakistan) Ltd with a perspective that bank’s earnings propensity has increased in CY11

According to Standard Capital, the reason why we wish to cover SCBPL is the amount of disbursement under the dividend head which we feel is impressive as against any other corporate in Pakistan. Rs 1/share dividend announcement means payment of nearly over Rs 3bn which is commendable. On the flipside, the majority holding in SCBPL is also rest with SCBPL foreign owners and hence there will be some of capital as external outflows. The profit after tax of SCBPL has increased to Rs 5.5 billion in the year CY11 as compared to Rs 3.6 billion earned in the year CY10.The bank’s EPS increased to Rs 1.41 in the period under review against Re 0.93 in the same period a year back. The board of the bank in its meeting held yesterday recommended a final cash dividend at Re 1.0/share, i.e. 10 % for the year as against Re0.6/share given last year.

Operating results improved due to better interest rates and flat admin cost

Bank’s interest earning increased to nearly Rs 32 billion in CY11 against Rs 28 billion in CY10 while interest expenses increased to Rs 11.4 billion against Rs 10.7 bn. The bank’s non-interest income increased to Rs 6.2 billion in CY11 against Rs 6.2 billion in CY10 while bank’s non-interest expenses increased to Rs 13.8 billion against Rs 13.5 bn. Unlike other Pakistani banks, SCBPL was a bit better off in terms of not so huge increase in admin cost (imagine MCB’s admin cost increase as against SCBPL). SCBPL profit before taxation increased to Rs 8.4 billion in CY11 against Rs 5.6 billion in CY10.

Some good silver lining recovered from loan write offs and shown resilient core income during CY11 in the wake of spike in interest rates. SCBPL is known for premium pricing and hence its core earning has increased.

SCBPL is sitting with a one of the highest paid up Rs 38.7 billion after NIB bank (which is still under distress); we see SCBPL ROE to increase in coming years from present level of 7% in the wake of increase in earnings assets since bank could be one of the efficient players in treasury finance.

Hence SCBPL passed on dividend payout of Re 1/share (CY10E: Re 0.6/share) and hence we see a good dividend yield of 10%.

CY09 CY10 CY11
EPS 0.17 0.93 1.41
DPS 0 0.6 1.00
Div. 6% 10%  
0yield      
BV 12.3 13.2 21
PBV 0.79 0.74 0.47
ROE 1.4% 7.1% 7%
Banking sector PBV     1.2
Banking sector PBV (5 big)     1.2
Fair      
Value   25.20  

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