The management of BAFL held an analyst briefing today to discuss the 9MCY21 results and give an outlook of the bank’s strategy going forward. Below are the key takeaways:
· BAFL announced earnings for 9MCY21 at PKR 10.7bn (EPS: PKR 6.03) compared to last year same period’s earnings of PKR 8.7bn (EPS: PKR 4.87), depicting a YoY uptick of 24% YoY | 4% QoQ. Massive reductions in provisioning and quarterly rise in interest earned contributed to the profitability during the quarter.
· NII arrived at PKR 11.9bn during 3QCY21, marking a muted 2% QoQ uptick, mainly on the back of adjustment to overseas NII & recoveries recorded in 2QCY21.
· Home remittances market share increased to 13.8% of the bank, 540bp higher than last year’s share. While trade market share increased to 7%, 50bp higher than last year’s share.
· Coverage is above 100% while infection fell to 3.7%. Remaining PKR 3.1bn Covid GP represents 3.85% of total exposure to restructured borrowers. The management is confident on the outlook of its asset quality and finds no cause of concern as of yet on its restructured book but assessment will continue on a regular basis.
· The bank’s deposits consolidated above PKR 1 trillion, marking a 26% YoY growth. The growth was attained while improving the current account mix to 45%.
· The loan book of the bank grew by 30% YoY witnessing growth across all the segments. With this the ADR of the bank stands at 64.8% which places BAFL comfortably above the threshold of penal tax rate.
· Admin expenses were up 17% YoY / 3% QoQ due to branch expansion.
Going forward, OPEX is expected to rise by 12-13%. The bank expects the branch expansion to continue while increasing its focus on technology.
· Government securities (PIB) portfolio comprises of: ~75% Floater PIBs (average yield at 7.9%) while remaining ~25% are fixed PIBs worth PKR 105bn (average yield 10% with average duration 3.5 years).
· The bank expects 75bps interest rate hike in the next policy and another 150bps hike in 1QCY22.
· IFRS 9 will be implemented from Jan’22. BAFL has done their internal assessment and the financial impact on the bank is very negligible.
· Payout policy depends on capital adequacy and profitability but is expected to remain as consistent as possible.
· On the currency parity outlook, the management is of the view that that demand and supply are the determining factors.
· CAR was down on QoQ basis, mainly due to build up in Risk Weighted Assets, but still well-above the minimum requirement.
Courtesy – AHL Research