We preview 4QCY21 results of our favored plays (HBL, MEBL & BAFL) in the BMA Banking Universe where we expect profitability to sum up to PKR 19.0Bn (↑59.8/↓2.5% YoY/QoQ). The sizable YoY surge in earnings is expected to be driven by strong headline growth (↑ 17% YoY) as interest rates were jacked up by 250bps in 4Q aided by robust contribution from NFI (↑16% YoY) and lower provisioning charge (↓65% YoY). On a QoQ basis, the mild decline is expected on the back of softer non-core income (↓7% QoQ) and higher provisioning charge.

However, we forecast interest income to improve by ~8% QoQ owing to NIMs accretion and balance sheet expansion which will likely contain the overall decline in earnings. Going into CY22, we expect NIMs accretion to be further visible from 1Q as the re-pricing element plays out. However, we can expect a slight slowdown in balance sheet expansion given the current macroeconomic situation. In line with our broader thesis, we remain bullish on Banks with our preferred plays being HBL, MEBL & BAFL. 

Courtesy – BMA Capital Management Ltd.