BAHL has reported stellar 3QCY23 NPAT of PKR11.4bn (EPS: PKR10.24), more than double YoY and 50% QoQ. The result is much better than our estimated 3Q EPS of PKR7.90/sh, with the deviation stemming from sharply higher NII, and lower than expected admin expenses. Results were accompanied by a surprise dividend of PKR4.50/sh – this follows the trend of interim payouts from the last quarter and is indicative of a lift in absolute payouts for CY23.
BAHL’s TTM dividend yield has already surpassed all the companies in the IMS Coverage Universe at 29%, and has led BAHL to close on its upper circuit today.
3QCY23 result highlights include:
§ BAHL reported stellar NII of PKR34bn – up 68% YoY and 30% QoQ – much higher than our estimated PKR29bn. This is being driven by rising low cost deposits base and strong margin expansion as assets reprice.
§ BAHL has reported a minor provision charge of PKR75mn vs. a reversal of PKR142mn in the previous quarter. The bank is no longer growing its general provisioning buffer given credit infection remains contained.
§ Fee income continues to grow at an impressive pace (up 32% YoY) to PKR3.9bn likely driven by uptick in cards business. This has helped overcome normalization in other line items (capital gains). Overall non- markup income has remained flat YoY while depicting a decent 7% QoQ uptick to PKR6.0bn.
§ Admin expenses are rising swiftly (up 25% YoY) to PKR17.5bn as BAHL continues to grow its brick and mortar network. That said, strong NII has helped reduce the Cost/Income to 45% vs. 55% in 2Q and 54% SPLY.
§ Effective tax rate has clocked in at 49% – stable QoQ and YoY.
Today’s payout is indicative of not just an increase in the frequency of payouts but absolute value as well. We think another payout in the 4QCY23 results lies in the offing. This may however, strain T1 capital which stood at 11.9% in June’23. BAHL remains a top banking play on its strong balance sheet positioning and sensitivity to high interest rates. BAHL trades at a CY24f P/B and P/E of 0.4x/1.6x – we have a TP of PKR70.0/sh.
Courtesy- Intermarket Securities Limited