A local research house expects that Faysal Bank Limited (FABL) to be converted into a complete Islamic bank by CY22. The bank received the nod from SBP in 2008. Since then, bank has been converting its conventional branches into Islamic branches. The bank converted 43 and 59 branches in CY20 and CY19 respectively. It is expected that the bank will be fully converted into an Islamic bank by CY22.

Out of 555 branches, the management has successfully converted 450+ branches into Islamic banking branches.

The conversion will make FABL the 3 rd completely Shariah compliant listed bank on PSX. At present, BIPL and MEBL remain the only listed Islamic banks. FABL is currently trading at PBV multiple of 0.48x as compared to MEBL and BIPL that are trading at 2.12x and 0.77x respectively. We expect FABL to outperform on the basis of improved earnings, higher coverage ratio, and controlled infection ratio going forward.

Bank’s assets are expected to grow by 8%YoY in CY21E, and we expect bank to record EPS of PKR 5.74, with an expected RoE of 13.5%. Due to its attractive valuation we foresee an upside of 64% from current price of PKR 19.48/share, with the target price of PKR 31.85/share for Dec-21. (Spectrum Research).