8/12/2019 M30MAY13

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Bank Alfalah Limited (BAFL) has been amongst the pick of investorsrecently, as the stock has managed to clock a return of 3% in last 2

trading sessions.

We take this opportunity to revisit our model where we revise up our2013E-14F earnings estimates by 3-9% and target price by 12% to Rs19.

To recall, in 1Q2013 BAFL posted earnings of Rs0.75 per share (down16%YoY) due to lower Net Interest Income (NII). However, reversals in

loan provisions provided a buffer to depleting core income.

The stock is currently trading at 2013 PBV and PE of 0.76x and 5.9xrespectively. We continue to maintain our Hold call on the stock.

Earnings and TP revised maintain HoldPost 1Q2013 result, we revisit our valuations for BAFL where we have revised our

2013E-14F earnings estimates by 3-9%. In line with recent trend in banking sector

of lower/reversal in provisions (given high vigilance on bad loans) BAFL reported

reversals of Rs66mn (vs provisions of Rs374mn in 1Q2012) in bad loan category.

Incorporating these reversals we now anticipate BAFLs 2013 earnings to clock in

at Rs3.00 per share compared to Rs2.90 expected earlier. We have also revised

our target price to Rs19 from 17 earlier which offers a potential upside of 7% at

current levels. The stock is currently trading at 2013 PBV and PE of 0.76x and 5.9x

respectively and we continue to maintain our Hold stance on the stock.

1Q2013 result reviewWith earning assets growing at a slower pace (2% in 1Q2013) and shrinkingspreads, BAFLs NII declined by 18%YoY to Rs3.8bn in 1Q2013. Respite came in

from lower cumulative provisions of Rs132mn (down 82%YoY) where bank

registered reversals of Rs66mn against bad loans.

Financial highlights

(Rs mn) 1Q2013 1Q2012 YoY%

Mark-up int earned 10,572 11,145 -5%

Mark-up int paid 6,748 6,500 4%

Net Interest Income 3,824 4,645 -18%

Prov/write offs 132 718 -82%

3,692 3,927 -6%

Non interest income 1,864 1,463 27%

Operating exp 4,028 3,566 13%

Profit Before Tax 1,527 1,824 -16%

Taxation 516 622 -17%

Profit After Tax 1,011 1,202 -16%

Earning Per Share 0.75 0.89 -16%

Source: Company accounts

Pakistan Banking SectorBAFL: Lower provisions a key factor maintain Hold

KSE100 Index: Closing 21,441.12 (60.60)KATS Code:BAFL

Bloomberg Code:BAFL PA

Reuters Code:BAFL.KA

Market Price: Rs17.80

Target Price: Rs19

Market Cap: Rs24bn, US$244mn

1-yr Avg. Daily Volume:2.4mn shares, Rs41mn, US$0.4mn

1-yr High / Low: Rs18.89 / 14.77

Estimated free float: 375mn shares(50%)

BAFL: Revised estimates

(Rs) New Old %

2013E 3.00 2.90 3%

2014F 3.36 3.09 9%

Target Price 19 17 12%

Source: JS Research

BAFL relative to KSE-100 Index

90%

115%

140%

165%

190%

215%

240%

Jan-12

Feb-12

Apr-12

May-12

Jul-12

Sep-12

Oct-12

Dec-12

Jan-13

Mar-13

May-13

BAFL

KSE-100 Index

Source: KSE

MORNING BRIEFING

Bilal Qamarbilal.qamar@js.com

+ 9221 111-574-111Ext: 3099

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M a y 3 0 , 2 0 1 3 MORNING BRIEFING

Page 2

Pakistan market statistics (May 29, 13)

KSE-100 Index

Previous KSE-100 Index

Change from last closing

Change from last closing (%)

KSE Market Cap. (Rs. bn)

KSE Market Cap. (US$ bn)

Total Volume (Shares mn)

Traded Value (Rs. bn)

Traded Value (US$ mn)

KSE-30 Index

Change from last closing

Change from last closing (%) -0.61%

KSE Futures Volume (Shares mn) 19.22

KSE Futures Value (Rs. mn)

KSE Futures Spread

Source: KSE

21,441.12

21,501.72

-60.60

-0.28%

5,206.63

52.85

484.56

12.23

10.90%

124.17

16,627.45

-101.95

1,584.19

KSE valuations

2013E 2014F 2015F

P/E (x) 7.8 7.1 6.7

P/BV (x) 1.7 1.6 1.5

Div. Yield (%) 6% 7% 7%

Earnings growth 15% 9% 6%

Source: JS Research

Meanwhile, the banks non interest income also grew by 27%YoY owing to 1)

18%YoY growth in commission and fee income and 2) higher capital gains booked

(Rs319mn vs Rs56mn in 1Q2012) as the KSE-100 has outperformedtremendously. Nonetheless, bank reported a decline of 16%YoY in the bottom line

during 1Q2013 reporting earnings of Rs0.75 per share.

NPL ratio grows by 1 QoQ to 10The banks deposit base declined by a single ppt to Rs451bn in 1Q2013 - with

domestic CASA remaining firm at 69%. Net advances, too, contracted slightly to

Rs233bn (vs Rs234bn in 1Q2012) with ADR increasing by 1ppts to 52%. As far as

bad loans are concerned banks NPL ratio grew to 10% from 9% in December 2012

while coverage ratio fell significantly to 58% from 63% in December 2012.

Rs261bn raised through treasury billsGovernment raised Rs261bn in government papers against the target of Rs200bn.

Cut off yields on 3-month, 6-month and 12-month paper were reduced by 5, 4 and

6 bps respectively.

Also in Focus

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This report has been prepared for information purposes by the Research Department of JS Global Capital Ltd. The information and data on which this report is based are obtained from sources whichwe believe to be reliable but we do not guarantee that it is accurate or complete. In particular, the report takes no account of the investment objectives, financial situation and particular needs ofinvestors who should seek further professional advice or rely upon their own judgment and acumen before making any investment. This report should also not be considered as a reflection on theconcerned companys management and its performances or ability, or appreciation or criticism, as to the affairs or operations of such company or institution. Warning: This report may not bereproduced, distributed or published by any person for any purpose whatsoever. Action will be taken for unauthorized reproduction, distribution or publication.