2nd Quarter 2015 earnings likely to fall significantly
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.