Prelude:
National bank of Pakistan is going to
announce its 2QCY13 shortly. We expect the bank to post a PAT of Rs. 3.80bn
translating into EPS of Rs. 1.79, taking
1HCY13 EPS to Rs. 3.21.
Key Quarterly Financial Highlights:
We expect the topline of the bank to
shrink, consistent with the industry, on account of lower margins. However, growth in earnings assets and significant
lower provisioning will result in higher NII after provisioning as compared to
corresponding quarter of CY12. The
bank’s non markup income is expected to grow robustly further supporting the
bottom line owing to expectations of higher gains in sale of investments.
Outlook And Valuations:
We expect earnings growth post 2013 owing to increase in interest rates. However, NBP is expected to face asset
quality issue in a high interest rate environment. Henceforth, we think the gains from increase in
interest rates will be limited due to higher provisioning expense. The bank is
currently trading at 0.83x its CY13(E) P/BV.
Based on year ended Dec 2013 value of Rs. 62 the scrip provides an
upside of 9%. The bank also offers a dividend yield of 9.3% taking total stock
return to over 18%. We have positive
stance on the scrip.
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