Morning Call about National Bank of Pakistan
Karachi: National Bank of Pakistan (NBP) is scheduled to announce its results for 1HCY11 on August 18, 2011. The bank is expected to post net earnings of PKR 8,625mn (EPS: PKR 5.13) in 1HCY11 compared to PKR 7,825mn (EPS: PKR 4.65) in the corresponding period last year, a rise of 10.2% YoY. In 2QCY11 the bank is anticipated to report profit after tax of PKR 4,404mn (EPS: PKR 2.62), a rise of 4.4% QoQ.
Net Interest income growth projected at 6.1%YoY
NBP’s net interest income is expected to rise by 6.1% YoY to stand at PKR 22,002mn as interest income is expected to rise by 6.5% YoY on the back of higher KIBOR and 7.4% higher average earning assets. The NIMs are anticipated to depict a decline of 4bps to stand at 5.88%.
Non Interest Income to contract by 10.5% YoY
Noninterest income is projected to depict a decline of 10.5% YoY during 1HCY11 to stand at PKR 7,425mn. This decline is mainly due to lower capital gains realized during the period, down by 45% YoY.
Provisioning are likely to drop by 28.5% YoY
The bank’s total provisions are estimated to decline by 28.5% YoY to reach PKR 3,184mn. This drop in provisioning is primarily due to 70% YoY lower impairment against investments. On the other hand provisioning against NPLs are anticipated to stand at PKR 2,717mn as Non performing loans by end of 1QCY11 had risen by 8.9% since December 2010.
Operating cost to rise by 2.3% YoY
The bank’s operating cost is likely to register a rise of 2.3%YoY to reach PKR 13,224mn compared to PKR 12,929mn in the corresponding period last year. This rise is emanating from higher salaries which make about 60% of the administration cost.
Recommendation
Arif Habib Limited has a Buy stance on the bank, as the stock is currently offering an upside potential of 42.6% with yesterday’s closing of PKR 45.6/share to our Dec 2011 target price of PKR 65/share. The stock is currently trading at CY11 P/B of 0.56 and dividend yield of 15.4%
| NBP Financial Highlights | ||||||
| PKRmn | ||||||
| 2QCY11 | 1QCY11 | YoY | 1HCY11 | 1HCY10 | YoY | |
| Interest income | 23,137 | 23,170 | -0.1% | 46,308 | 43,471 | 6.5% |
| Interest expense | 12,081 | 12,225 | -1.2% | 24,306 | 22,733 | 6.9% |
| Net Interest Income | 11,057 | 10,946 | 1.0% | 22,002 | 20,738 | 6.1% |
| Prov for investment | 185 | 281 | -34.2% | 466 | 1,576 | -70.4% |
| Prov against NPLs | 1,328 | 1,389 | -4.4% | 2,717 | 2,878 | -5.6% |
| Total Provisions | 1,513 | 1,671 | -9.4% | 3,184 | 4,455 | -28.5% |
| Non Interest income | 3,768 | 3,657 | 3.0% | 7,425 | 8,300 | -10.5% |
| Operating Expenses | 6,645 | 6,580 | 1.0% | 13,224 | 12,929 | 2.3% |
| Profit before Tax | 6,667 | 6,353 | 4.9% | 13,019 | 11,654 | 11.7% |
| Tax | 2,262 | 2,133 | 6.1% | 4,395 | 3,829 | 14.8% |
| Net income | 4,404 | 4,220 | 4.4% | 8,625 | 7,825 | 10.2% |
| EPS | 2.62 | 2.51 | 4.4% | 5.13 | 4.65 | 10.2% |
| Source: Company Accounts & AHL Research | ||||||
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