2nd Quar­ter 2015 earn­ings likely to fall sig­nif­i­cantly

The Pak Banker - - FRONT PAGE - Ja­hangir Hayat

Bank Al Habib Lim­ited's (BAHL) and Askari Bank Lim­ited (AKBL) 2Q2015 are likely to fall sig­nif­i­cantly, ex­perts in­di­cated.

"We ex­pect Bank Al Habib Lim­ited's (BAHL) 1H2015 earn­ings to de­cline by 6% YoY to Rs2.77bn (EPS Rs2.50) on higher ef­fec­tive tax rate. We an­tic­i­pate Profit be­fore Tax (PBT) to in­crease by 5% YoY on 29% YoY in­crease in Net In­ter­est In­come (NII), even though pro­vi­sion­ing ex­penses are likely to jump YoY amid in­crease in in­fec­tion ra­tio," they said.

They said 2Q2015 earn­ings will clock in 26% YoY and 27% QoQ lower at Rs1.17bn (EPS Rs1.05), where ef­fec­tive tax rate is ex­pected at 48% on the back of 4% Su­per Tax.

How­ever, they did not ex­pect ap­pli­ca­bil­ity of 35% uni­form tax rate from tax year 2015 to ma­te­ri­ally im­pact BAHL's earn­ings as ma­jor­ity of 2014 in­come streamed from core bank­ing oper­a­tions. On YoY ba­sis, pro­vi­sion­ing ex­penses are also ex­pected to es­ca­late due to low base and NPL ac­cre­tion in 1Q2015, while op­er­at­ing costs are likely to es­ca­late by 21% YoY as BAHL con­tin­ues to ex­pand its branch

net­work, it was said, adding that to­tal in­come may wit­ness a 15% YoY im­prove­ment; how­ever, on a QoQ ba­sis the same is ex­pected to de­cline by 7% on the back of neg­a­tive im­pact of mon­e­tary eas­ing. In ad­di­tion, we build-in nor­mal­ized Gain on Sale of Se­cu­ri­ties for the quar­ter. We do not ex­pect any cash pay­out along­side the re­sult. Se­condly, Askari Bank Lim­ited (AKBL) is also ex­pected to post 33% YoY lower earn­ings of Rs1.42bn (EPS: Rs1.13) in 1H2015, where profit be­fore tax (PBT) is ex­pected to de­cline by 4% YoY. Higher ef­fec­tive tax rate of 51% in 1H2015 (vs. 29% 1H2014) ow­ing to one-time 4%

Su­per Tax and 35% tax on all in­come in 2014 is ex­pected to limit growth in the bank's bot­tom-line. AKBL's Net In­ter­est In­come (NII) is an­tic­i­pated to grow by 22% YoY dur­ing the pe­riod, while Non-In­ter­est In­come may de­cline by 8% YoY on the back of cap­i­tal gains re­al­ized in 1H2014. 2Q prof­its is said to take a hit, cap­i­tal gains may pro­vide sup­port In 2Q2015 alone, earn­ings are ex­pected to fall by 85% YoY to Rs163mn (EPS: Rs0.13), whereas the same is ex­pected to fall by 87% QoQ on (1) higher ef­fec­tive tax rate of 84%, (2) de­cline in NII and (3) nor­mal­ized cap­i­tal gains. Higher than peer ef­fec­tive tax rate is a re­sult of high­est con­tri­bu­tion of lower tax in­come to 2014 PBT in bank­ing sec­tor. How­ever, the bank may book cap­i­tal gains dur­ing the quar­ter to sup­port its bot­tom-line, sim­i­lar to 1Q2015. Along­side re­sult, we do not ex­pect any cash pay­out by the bank.


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