Stock Rating

Buy

Target Price
PKR49.0

Closing Price
PKR41.5

Key Financial Highlights (Dec Year End) Stock Data

Closing Price PKR41.5 as of 15 Sep 2017
In PKRbn, unless otherwise stated 2016a 2017e 2018e 2019e Last Div. / Ex. Date PKR1.00 / 18 Mar 2016
Total banking income 38 40 44 50 Mkt. Cap / Shares (mn) PKR66,698 / 1,608
Av. Daily Liquidity (mn) PKR77.89
Operating income 14 15 17 21
52-Week High / Low PKR47.0 / PKR28.5
Net income 8 9 10 12 Bloomberg / Reuters BAFL PA / BAFL.KA
EPS (PKR) 5.09 5.45 6.26 7.62 Est. Free Float 35.0%
EPS consensus (PKR) 5.09 N/A N/A N/A
Price to earnings 8.2x 7.6x 6.6x 5.4x
Dividend yield 0.0% 0.0% 2.4% 2.9%
Price to book value (tangible) 1.1x 1.0x 0.9x 0.8x
ROAE (tangible) 14.3% 13.5% 13.6% 14.7%
Capital adequacy ratio 13.3% 14.2% 15.2% 15.1% Murad Ansari
NPL coverage 90.1% 91.1% 92.4% 92.4% +971 4 3634010 | mansari@efg-hermes.com

Source: Bank Alfalah , Bloomberg and EFG Hermes estimates

Dec Year End Dec Year End

In PKRbn, unless otherwise stated 2016a 2017e 2018e 2019e In PKRmn, unless otherwise stated 2016a 2017e 2018e 2019e

Income Statement Valuation Metrics

Net interest income 29 29 32 37 Price to earnings 8.2x 7.6x 6.6x 5.4x
Non interest income 9 10 11 12 Price to pre-provision earnings 4.7x 4.5x 3.9x 3.1x
Total banking income 38 40 44 50 Price to book value 1.1x 1.0x 0.9x 0.8x
Operating expenses (24) (25) (27) (28) Price to book value (tangible) 1.1x 1.0x 0.9x 0.8x
Operating income 14 15 17 21 Dividend yield 0.0% 0.0% 2.4% 2.9%
Total provisions (1) (1) (1) (1) ROAA 0.9% 0.9% 1.0% 1.1%
Other income / (expense) 1 1 1 1 ROAE 14.3% 13.5% 13.6% 14.7%
Income before taxes or zakat 14 14 16 20 ROAE (tangible) 14.3% 13.5% 13.6% 14.7%
Taxes or zakat (5) (6) (6) (8) Leverage (Assets / Equity) 15.9x 14.6x 14.0x 13.8x
Minorities & other items (0) (0) (0) (0) KPIs
Net income 8 9 10 12 Loan growth (Y-o-Y) 13.3% 12.5% 14.4% 14.3%
Balance Sheet - Key Highlights Loans / Deposits 59.1% 62.1% 63.5% 64.2%
Customer loans 379 426 487 557 Banking income growth (Y-o-Y) 0.7% 4.7% 10.2% 13.3%
Total interest earning assets 815 869 966 1,072 Operating income growth (Y-o-Y) -8.5% 3.4% 17.1% 23.0%
Risk-weighted assets 434 466 525 596 Earnings growth (Y-o-Y) 4.5% 8.0% 14.8% 21.7%
Total assets 919 982 1,088 1,205 Net interest spread 3.67% 3.59% 3.62% 3.74%
Customer deposits 641 686 768 868 Non-interest income / Banking inc. 23.6% 26.0% 26.0% 24.7%
Total interest bearing liabilities 841 896 993 1,099 Cost-to-income 62.5% 63.0% 60.6% 57.3%
Common shareholders' equity 61 69 78 88 NPL ratio 4.8% 4.3% 3.9% 3.6%
Per Share Numbers NPL coverage 90.1% 91.1% 92.4% 92.4%
EPS (PKR) 5.09 5.45 6.26 7.62 Cost of risk (bps) 29.0 5.3 16.0 19.2
DPS (PKR) 0 0 1.000 1.200 Tier 1 ratio 9.9% 11.1% 11.5% 11.9%
BVPS (PKR) 38.0 43.2 48.5 54.9 Capital adequacy ratio 13.3% 14.2% 15.2% 15.1%
BVPS (tangible) (PKR) 38.0 43.2 48.5 54.9 Source: Bank Alfalah , EFG Hermes estimates
Source: Bank Alfalah , EFG Hermes estimates
Income Statement (Dec Year End) Key Performance Indicators (%)
In PKRbn 2016a 2017e 2018e 2019e unless otherwise stated 2016a 2017e 2018e 2019e
Net interest income 29 29 32 37 DuPont analysis (%) of average assets
Fees & commissions 5 6 7 8 Net interest income 3.2% 3.1% 3.1% 3.3%
Forex income 1 1 1 2 Non interest income 1.0% 1.1% 1.1% 1.1%
Investment income 2 2 2 2 Operating expenses -2.6% -2.6% -2.6% -2.5%
Other operating inc. (expense) 1 1 1 1 Other revenue (expense) 0.0% 0.0% 0.0% 0.0%
Non interest income 9 10 11 12 Provisioning -0.1% -0.1% -0.1% -0.1%
Total banking income 38 40 44 50 Taxes -0.6% -0.6% -0.6% -0.7%
Operating expenses (24) (25) (27) (28) Other items 0.0% 0.0% 0.0% 0.0%
Operating income 14 15 17 21 ROAA 0.9% 0.9% 1.0% 1.1%
Loan loss provisions (1) (0) (1) (1) Leverage (assets / equity) 15.9x 14.6x 14.0x 13.8x
Other provisions 0 (0) (0) (0) ROAE (tangible) 14.3% 13.5% 13.6% 14.7%
Other income / expense 1 1 1 1 Profitability
Income before taxes or zakat 14 14 16 20 Yield on interest earning assets 7.1% 6.6% 6.5% 6.6%
Taxes or zakat (5) (6) (6) (8) Cost of funds 3.4% 3.0% 2.9% 2.9%
Net inc. before minority interest 8 9 10 12 Net interest spread 3.67% 3.59% 3.62% 3.74%
Minority interest (0) (0) (0) (0) Net interest margin 3.57% 3.49% 3.53% 3.66%
Net income after minorities 8 9 10 12 Non-interest inc. / Banking inc. 23.6% 26.0% 26.0% 24.7%
Cost of AT1 cap.,pref.div.&others 0 0 0 0 Cost-to-income 62.5% 63.0% 60.6% 57.3%
Net income 8 9 10 12 Effective tax rate 39.9% 38.4% 38.6% 38.8%
Source: Bank Alfalah , EFG Hermes estimates Asset Quality
NPL ratio 4.8% 4.3% 3.9% 3.6%
Balance Sheet (Dec Year End)
In PKRbn 2016a 2017e 2018e 2019e NPL coverage 90.1% 91.1% 92.4% 92.4%

Cash & central bank deposits 74 80 87 96 Cost of risk (bps) 29.0 5.3 16.0 19.2

Interbank assets 40 41 52 64 Capital

Investments 390 396 421 445 CET1 ratio 9.9% 11.1% 11.5% 11.9%

Customer loans 379 426 487 557 Tier 1 ratio 9.9% 11.1% 11.5% 11.9%

Goodwill & intangibles 0 0 0 0 Capital adequacy ratio 13.3% 14.2% 15.2% 15.1%

Fixed & other assets 37 39 41 43 Risk weight. assets / Total assets 47.2% 47.5% 48.3% 49.5%

Total assets 919 982 1,088 1,205 Growth Rates (Y-o-Y)

Interbank deposits 13 14 15 17 Loan growth 13.3% 12.5% 14.4% 14.3%

Customer deposits 641 686 768 868 Deposits growth 0.1% 7.0% 12.0% 13.0%

Borrowings 187 197 210 214 Assets growth 1.8% 6.8% 10.8% 10.8%

Other liabilities 18 16 16 17 Risk-weighted assets growth 12.7% 7.4% 12.7% 13.5%

Total liabilities 859 912 1,009 1,116 Net interest income growth 0.5% 1.4% 10.2% 15.3%

Common shareholders' equity 61 69 78 88 Fees & commissions inc. growth 12.1% 18.0% 16.0% 14.0%

Additional tier I capital 0 0 0 0 Non interest income growth 1.5% 15.4% 10.2% 7.8%

Preferred share capital 0 0 0 0 Banking income growth 0.7% 4.7% 10.2% 13.3%

Minority interest 0 0 0 0 Operating expenses growth 7.2% 5.5% 6.1% 7.0%

Total equity and liabilities 919 982 1,088 1,205 Operating income growth -8.5% 3.4% 17.1% 23.0%
Earnings growth 4.5% 8.0% 14.8% 21.7%
Source: Bank Alfalah , EFG Hermes estimates
Other Ratios
Loans / Deposits 59.1% 62.1% 63.5% 64.2%
Loans / Assets 41.2% 43.4% 44.8% 46.2%
Deposits / Interest bearing liab. 76.2% 76.5% 77.3% 79.0%
Source: Bank Alfalah , EFG Hermes estimates
Ownership Structure (%)
IFC
15.0%

Abu Dhabi
Group
50.0%
Free float
35.0%

Rating Distribution
Rating Coverage Universe%

Buy 49%
Neutral 40%
Sell 11%
Not Rated 0%
Under Review 0%