Karachi: The Board of Directors of Habib Metropolitan Bank (HMB) is scheduled to consider the bank’s 1HCY11 results later today (result may be announced on Monday as Board meeting is after market hours).
According to AKD Securities, on an unconsolidated basis, AKD Securities expects HMB to post NPAT of PkR1.52bn (fully- diluted EPS: PkR1.45) in 1HCY11 against NPAT of PkR1.47bn (EPS: PkR1.40) in 1HCY10, up just 3%Y0Y. AKD Securities does not expect any payout alongside 1HCY11 results. Key highlights of projected 1HCY11 results are expected to be 1) flat NIL due to stable NIMs at -3%, 2) contained 9%YoY increase in loan provisions, strong 27%YoY growth in non- interest income primarily due to higher FX income and 4) relatively high admin expense growth of 22%Y0Y. Having shed 28%CYTD (21% underperformance vs. the Index), HMB trades at a CY11F P/B of O.75x and PER of 5.71x. AKD Securities has an Accumulate stance on HMB based on AKD Securities’ target price of PkR20/share where, considering the bank’s key role in the trade finance segment, AKD Securities highlights 1) resilient textile exports and 2) recent uptick in cotton prices as key share price triggers.
Profit and Loss Accounts
| (In PkRmn) | 1HCY11E | 1HCY10 | YoY | 2QCY11E | 1QCY11 | QoQ |
| Interest Earned | 13,067 | 11,567 | 13% | 6,624 | 6,442 | 3% |
| Interest Expense | 9,568 | 8,131 | 18% | 4,849 | 4,718 | 3% |
| Net Interest Income | 3,499 | 3,436 | 2% | 1,775 | 1,724 | 3% |
| Loan Provisions | 1,482 | 1,359 | 9% | 675 | 807 | -16% |
| Total Provisions | 1,504 | 1,443 | 4% | 700 | 804 | -13% |
| Post Provision Nll | 1,995 | 1,993 | 0% | 1,075 | 920 | 17% |
| Fee Income | 938 | 805 | 17% | 475 | 463 | 2% |
| FX Income | 1,138 | 774 | 47% | 575 | 563 | 2% |
| Non Interest Income | 2,722 | 2,141 | 27% | 1,350 | 1,372 | -2% |
| Tolal Income | 4,716 | 4,134 | 14% | 2,425 | 2,291 | 6% |
| Non Interest Expenses | 2,502 | 2,047 | 22% | 1,275 | 1,227 | 4% |
| Net Profit Before Tax | 2,215 | 2,087 | 6% | 1,150 | 1,065 | 8% |
| Total Taxation | 696 | 615 | 13% | 388 | 308 | 26% |
| Net Profit | 1,519 | 1,472 | 3% | 762 | 757 | 1% |
| EPS (PkR) | 1.45 | 1.40 | 3% | 073 | 072 | 1% |
| Source: Company Reports & AKD Research | ||||||
What will unlock value? Considering that >|5O% of HMBs loan book is extended to the textile sector, the bank’s profitability is greatly entwined with textile sector performance, particularly textile exports. In this regard, AKD Securities highlights that 1) Jul11 exports have increased by 28%YoY where Pakistan’s low value-added exports tend to be resistant to global economic slowdowns and 2) cotton prices appear to have stabilized and are up 33% since their recent trough. In AKD Securities’ view, continuation of recent trends may unlock price performance potential for RMB. While asset quality concerns remain (7%QoQ NFL accretion in 1QCY11/below-average coverage at 71%), AKD Securities expects HMB will post a CY10-CY15F PAT CAGR of 15% even if credit costs average a high 1.8% (vs. 1.3% across previous five years). AKD Securities’ target price of PkR20/share offers upside of 15.75%.