BAHL has posted 2QCY23 NPAT of PKR7.6bn (EPS: PKR6.83), up a sharp 63% YoY but lower by 29% QoQ. The result is better than our estimated 2Q EPS of PKR5.25, with the deviation largely stemming from very high fee income (up 50%YoY). This has helped offset a sharp 31 %YoY rise in admin expenses. Notably, BAHL announced a cash dividend of PKR4.50/sh which is a departure from its history of year-end payouts.

2QCY23 result highlights include:

Net interest income came in line with projections at PKR26.3bn – up 45% YoY and 7% QoQ on strong margin expansion as assets re-price.

BAHL has reported a minor total provisioning reversal of PKR142mn vs. a charge of PKR498mn SPLY – largely inline with our estimates.

BAHL’s fee income is growing at an impressive pace (up 50% YoY) to PKR3.8bn likely driven by uptick in the trade business. This has helped overcome normalization in other line items (fx income and capital gains). Overall non- markup income is down 6% YoY and 13% QoQ to PKR5.6bn.

Admin expenses are rising swiftly (up 31% YoY) to PKR17.3bn as BAHL continues to grow its brick and mortar network. Consequently the Cost/Income has jumped to 55% vs. 49% in 1Q and 56% SPLY

Effective tax rate has clocked in at 48% vs. 36% in the previous quarter and 55% SPLY.

We retain our Buy stance on BAHL with a TP of PKR70/sh. Valuations remain attractive – CY23f P/B and P/E of 0.5x/2.0x, and earnings could well accelerate in 2HCY23 as asset re-pricing comes through more forcefully. It is possible that BAHL’s interim dividend becomes the new payout policy.

Courtesy – Intermarket Securities Limited