External broker reports(aggregated public sources), Topline Securities

Topline Securities

External broker reports(aggregated public sources)

Topline Securities is one of the fastest growing brokerage houses in Pakistan. It has strong equity brokerage, economic / equity research, mutual fund distribution, commodity trading and corporate finance & advisory functions. Content available is external broker reports authored by a third party outside the Smartkarma network and has been aggregated by an online aggregator through publicly available sources and is displayed by Smartkarma in this format for user's convenience and general informational purposes only. Content does not constitute investment or financial advice and Smartkarma makes no representation or warranty regarding its accuracy or contents. Original third party author retains all copyright and other proprietary rights in the content. Access or use of third party links not controlled by Smartkarma are at the user's own risk.

Thematic (Sector/Industry)

<ul><li>Topline Banking Universe is likely to post an earnings growth of 76% YoY in 3Q2023, driven by higher Net Interest Income (NII) and lower provision expense.</li><li>NII of the banks in the Universe is likely to increase by 45% YoY to Rs256bn on the back of rising asset yields. 6M Kibor/T-Bill /PIB rates have increased to 23.24%/23.06%/19.61% respectively (up around 600-700bps on YoY basis) in 3Q2023.</li><li>On other hand, SBP policy rate which determines the minimum profit rate on saving accounts stood at 20.50% in 3Q2023, up 700bps YoY.</li></ul><p><em>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.</em></p>

Topline Banking Universe is likely to post an earnings growth of 76% YoY in 3Q2023, driven by higher Net Interest Income (NII) and lower provision expense.NII of the banks in the Universe is likely to increase by 45% YoY to Rs256bn on the back of rising asset yields. 6M Kibor/T-Bill /PIB rates have increased to 23.24%/23.06%/19.61% respectively (up around 600-700bps on YoY basis) in 3Q2023.On other hand, SBP policy rate which determines the minimum profit rate on saving accounts stood at 20.50% in 3Q2023, up 700bps YoY.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Pakistan Banks - Topline Universe Banks Earnings Are Expected to Be up 76% YoY in 3Q2023

<ul><li>Pakistan listed banks profitability increased to record Rs131bn (up 3x YoY) in 2Q2023. This was primarily driven by significant jump in Net Interest Income (NII) amid high interest rates, and balance sheet growth. In US$ terms listed banks profit was up 2x YoY to US$459mn in 2Q2023.</li><li>NII of the sector clocked in at Rs420bn in 2Q2023 vs. Rs243bn in 2Q2022 up 73% YoY as average policy rates during 2Q2023 remained to 21% vs. 13% in 2Q2023. Interest income was up by 97% YoY to Rs1.4trn, whereas interest expense was up by 109% YoY to Rs946bn.</li><li>Non-interest income of the sector down marginally by 1% to Rs86bn in 2Q2023 mainly due to decline in FX income. On other hand, non-markup expense was up 33% YoY to Rs217bn in 2Q2023 due to higher admin expense which is in line with inflation.</li></ul><p><em>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.</em></p>

Pakistan listed banks profitability increased to record Rs131bn (up 3x YoY) in 2Q2023. This was primarily driven by significant jump in Net Interest Income (NII) amid high interest rates, and balance sheet growth. In US$ terms listed banks profit was up 2x YoY to US$459mn in 2Q2023.NII of the sector clocked in at Rs420bn in 2Q2023 vs. Rs243bn in 2Q2022 up 73% YoY as average policy rates during 2Q2023 remained to 21% vs. 13% in 2Q2023. Interest income was up by 97% YoY to Rs1.4trn, whereas interest expense was up by 109% YoY to Rs946bn.Non-interest income of the sector down marginally by 1% to Rs86bn in 2Q2023 mainly due to decline in FX income. On other hand, non-markup expense was up 33% YoY to Rs217bn in 2Q2023 due to higher admin expense which is in line with inflation.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Pakistan Banks: Listed Banks Report Record Profitability; Earnings Jump 3 Times in 2Q2023

Global Bank Equity Specialist, Creative Portfolios

Paul Hollingworth

Global Bank Equity Specialist

Creative Portfolios

<p>We see opportunity in Pakistan banks where many just see risk. There are a number of Pakistani banks currently in the top decile and quartile, respectively, of our global VFM model. VFM expresses an asset according to its value-quality characteristics (PH Score™), its technical picture, and an additional valuation filter. Meezan is in the top decile globally.</p><p>Meezan dominates the fastest-growth market in Asia: Islamic Banking. In a Rs3.0 trillion deposit space (17% of the system), Meezan commands a leading 36% market share. Meezan Bank’s share of deposits amongst dedicated Islamic Banks operating in Pakistan is approximately 60%. SBP targets Islamic Banking to reach 30% of system Assets over the next four years versus a current position of 16%.</p><p>Meezan is now the seventh largest bank in Pakistan by deposits and branches. Deposit market share has jumped to 7%. With more than 3 million clients, the bank now has 825 branches and some 880 ATMs across 255 cities. The bank dedicates itself to supporting investment (Corporate/SME) which in our opinion is exactly what a bank should be doing. In fast growing AM, the bank counts on more than more than 120,000 investors with a Shariah-compliant investment proposition. With remittances booming last year, Meezan became the leading bank in generating investment opportunities for non-residents with its Roshan Digital Accounts. Meezan Bank is the largest bank in terms of number of transactions that pass through the country’s main switch and the second largest in digital transfers and bill payments through this switch. The bank also processes the largest volume of e-commerce transactions among Pakistani banks through debit cards portfolio (with a 30% share) and commands an award-winning Mobile Banking App. The bank is ranked number 1 rated mobile app on Google Play Store and on Apple Store. In 2020, there was a 97% YoY jump in digitally enabled customers at Meezan, a 75% YoY rise in volume of digital transactions, and a 72% YoY increase in e-commerce transactions. Bill payments and digital transfers expanded by 2x and 4x, respectively.</p><p>Given its growth, it is a tribute to Meezan management that the PH Score™ variables remain so strong. Our PH Score™ shows that the bank is making progress in Profitability, in Efficiency, in Liquidity (swelled by CASA expansion), and in Provisioning though NIM/Spread shows some compression, Asset Quality reveals some erosion, and Capitalisation, while remaining well above regulatory threshold levels, has softened somewhat. The top and bottom lines both display robust growth.</p><div class="content-highlight"><p>The shares are not expensive in light of the growth. A FV of 12%, a PBV of 2.0x, an Earnings Yield of 16.5%, and a Dividend Yield of 6.9% are not unattractive given few banks globally currently are experiencing such a surge in business activity even in challenging times.</p></div>

We see opportunity in Pakistan banks where many just see risk. There are a number of Pakistani banks currently in the top decile and quartile, respectively, of our global VFM model. VFM expresses an asset according to its value-quality characteristics (PH Score™), its technical picture, and an additional valuation filter. Meezan is in the top decile globally.Meezan dominates the fastest-growth market in Asia: Islamic Banking. In a Rs3.0 trillion deposit space (17% of the system), Meezan commands a leading 36% market share. Meezan Bank’s share of deposits amongst dedicated Islamic Banks operating in Pakistan is approximately 60%. SBP targets Islamic Banking to reach 30% of system Assets over the next four years versus a current position of 16%.Meezan is now the seventh largest bank in Pakistan by deposits and branches. Deposit market share has jumped to 7%. With more than 3 million clients, the bank now has 825 branches and some 880 ATMs across 255 cities. The bank dedicates itself to supporting investment (Corporate/SME) which in our opinion is exactly what a bank should be doing. In fast growing AM, the bank counts on more than more than 120,000 investors with a Shariah-compliant investment proposition. With remittances booming last year, Meezan became the leading bank in generating investment opportunities for non-residents with its Roshan Digital Accounts. Meezan Bank is the largest bank in terms of number of transactions that pass through the country’s main switch and the second largest in digital transfers and bill payments through this switch. The bank also processes the largest volume of e-commerce transactions among Pakistani banks through debit cards portfolio (with a 30% share) and commands an award-winning Mobile Banking App. The bank is ranked number 1 rated mobile app on Google Play Store and on Apple Store. In 2020, there was a 97% YoY jump in digitally enabled customers at Meezan, a 75% YoY rise in volume of digital transactions, and a 72% YoY increase in e-commerce transactions. Bill payments and digital transfers expanded by 2x and 4x, respectively.Given its growth, it is a tribute to Meezan management that the PH Score™ variables remain so strong. Our PH Score™ shows that the bank is making progress in Profitability, in Efficiency, in Liquidity (swelled by CASA expansion), and in Provisioning though NIM/Spread shows some compression, Asset Quality reveals some erosion, and Capitalisation, while remaining well above regulatory threshold levels, has softened somewhat. The top and bottom lines both display robust growth.The shares are not expensive in light of the growth. A FV of 12%, a PBV of 2.0x, an Earnings Yield of 16.5%, and a Dividend Yield of 6.9% are not unattractive given few banks globally currently are experiencing such a surge in business activity even in challenging times.

Meezan: The Trusted Partner in an Islamic Banking Boom

Equity Bottom-Up

<p><a href="https://www.smartkarma.com/entities/habib-bank-ltd" target="_blank" data-smartkarma-citation="entities:371:1" rel="noopener">Habib Bank Ltd (HBL PA)</a> </p><p>To date, FY20/19 <strong>PH Scores™</strong> out of Pakistan have caught the eye again relative to SE Asia and other global jurisdictions.</p><p><strong>HBL</strong> dedicates itself to mainly corporate lending (manufacturing, utilities, government etc) and to a much lesser extent the consumer segment, backed by source of funding from CASA funding (82%).</p><p>The bank compares well to peers of a similar size and business model with its low LDR, a high ROA, ROE, NIM, and an elevated Total Capital Ratio.</p><p>FY20/19 results show positive fundamental momentum and trends with improvement in Profitability, in Efficiency, in NIM/Spread, in Liquidity, in headline Asset Quality, and in Provisioning while some- though not all- Capital Adequacy ratios (Equity/Assets and Basel III Leverage Ratio) showed some lightweight erosion. Growth in “Core Income” was vibrant, supported more by gains of Interest Income on Securities and reduced Funding Costs from Interest-bearing Liabilities than by a modest expansion of the Balance Sheet. In addition, “non-core Income” streams (such as trading gains) showed dynamism, covering the sizeable increase in LLPs. All in all, Comprehensive Income expanded by 35% YoY.</p><div class="content-highlight"><p>A FV of 7%, a PBV of 0.68x, and an Earnings Yield of 18.2% are not unappealing for a small GEM fund. The bank commands both a high PH Score™ (9.7) and top decile VFM ranking which captures strong fundamental trends, low valuation, and an oversold trading condition.</p></div><div><div><div class="content-highlight"><p>VFM expresses an asset according to its value-quality characteristics (PH Score™), its technical picture, and an additional valuation filter. HBL is in the top decile globally.</p></div></div></div><div class="content-highlight"><p><span>The PH Score™ is a fundamental momentum-quantamental score that scores banks according to changes in value-quality. The Score encompasses Profitability, Operating Efficiency, Liquidity, Capital, Asset Quality, and Coverage as well as a valuation variable. Scores lie between 0 and 10, with higher scores representing more positive signs. The PH Score™ was back tested over 2007-17 for global banks and conclusively shows progressively higher returns across quintiles ranked by Score. </span></p></div>

Habib Bank Ltd (HBL PA) To date, FY20/19 PH Scores™ out of Pakistan have caught the eye again relative to SE Asia and other global jurisdictions.HBL dedicates itself to mainly corporate lending (manufacturing, utilities, government etc) and to a much lesser extent the consumer segment, backed by source of funding from CASA funding (82%).The bank compares well to peers of a similar size and business model with its low LDR, a high ROA, ROE, NIM, and an elevated Total Capital Ratio.FY20/19 results show positive fundamental momentum and trends with improvement in Profitability, in Efficiency, in NIM/Spread, in Liquidity, in headline Asset Quality, and in Provisioning while some- though not all- Capital Adequacy ratios (Equity/Assets and Basel III Leverage Ratio) showed some lightweight erosion. Growth in “Core Income” was vibrant, supported more by gains of Interest Income on Securities and reduced Funding Costs from Interest-bearing Liabilities than by a modest expansion of the Balance Sheet. In addition, “non-core Income” streams (such as trading gains) showed dynamism, covering the sizeable increase in LLPs. All in all, Comprehensive Income expanded by 35% YoY.A FV of 7%, a PBV of 0.68x, and an Earnings Yield of 18.2% are not unappealing for a small GEM fund. The bank commands both a high PH Score™ (9.7) and top decile VFM ranking which captures strong fundamental trends, low valuation, and an oversold trading condition.VFM expresses an asset according to its value-quality characteristics (PH Score™), its technical picture, and an additional valuation filter. HBL is in the top decile globally.The PH Score™ is a fundamental momentum-quantamental score that scores banks according to changes in value-quality. The Score encompasses Profitability, Operating Efficiency, Liquidity, Capital, Asset Quality, and Coverage as well as a valuation variable. Scores lie between 0 and 10, with higher scores representing more positive signs. The PH Score™ was back tested over 2007-17 for global banks and conclusively shows progressively higher returns across quintiles ranked by Score. 

<p>Pakistan banks exhibit much stronger value-quality characteristics and fundamental momentum than anywhere else just now.</p><div><p>Shares look to have more potential upside than downside. </p></div><div><div>
<div class="content-highlight"><p>The PH Score™ is a fundamental momentum-quantamental score that scores banks according to changes in value-quality. The Score encompasses Profitability, Operating Efficiency, Liquidity, Capital, Asset Quality, and Coverage as well as a valuation variable. Scores lie between 0 and 10, with higher scores representing more positive signs. The PH Score™ was back tested over 2007-17 for global banks and conclusively shows progressively higher returns across quintiles ranked by Score. </p></div>
<p>For macro underpinning, despite the COVID disruption, please see <a href="https://www.smartkarma.com/profiles/sharmila-whelan" target="_blank" data-smartkarma-citation="accounts:1728" rel="noopener">Sharmila Whelan</a> on the basic case and thesis for Pakistan.</p>
</div></div>

Pakistan banks exhibit much stronger value-quality characteristics and fundamental momentum than anywhere else just now.Shares look to have more potential upside than downside. 
The PH Score™ is a fundamental momentum-quantamental score that scores banks according to changes in value-quality. The Score encompasses Profitability, Operating Efficiency, Liquidity, Capital, Asset Quality, and Coverage as well as a valuation variable. Scores lie between 0 and 10, with higher scores representing more positive signs. The PH Score™ was back tested over 2007-17 for global banks and conclusively shows progressively higher returns across quintiles ranked by Score. 
For macro underpinning, despite the COVID disruption, please see Sharmila Whelan on the basic case and thesis for Pakistan.


Pakistan

Habib Bank Ltd operates commercial bank in Pakistan. The Bank offers commercial, corporate, Investment, retail and International Group Banking.

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Habib Bank Ltd (HBL PA)

Pakistan Banks - Topline Universe Banks Earnings Are Expected to Be up 76% YoY in 3Q2023

Topline Banking Universe is likely to post an earnings growth of 76% YoY in 3Q2023, driven by higher Net Interest Income (NII) and lower provision...

Topline Securities

Pakistan Banks: Listed Banks Report Record Profitability; Earnings Jump 3 Times in 2Q2023

Pakistan listed banks profitability increased to record Rs131bn (up 3x YoY) in 2Q2023. This was primarily driven by significant jump in...

Topline Securities

Meezan: The Trusted Partner in an Islamic Banking Boom

Meezan continues to combine strong growth with enhanced Profitability and Efficiency. Shares do not reflect the upside in Islamic Banking.

Paul Hollingworth

Habib Bank: Stands Out Versus Peers

Pakistan banks combine strong value-quality trends versus other jurisdictions. HBL is a case in point with valuations attractive given fundamental...

Paul Hollingworth

Pakistan Banks: Remain a Buy

Pakistan banks exhibit much stronger value-quality characteristics and fundamental momentum than anywhere else just now.

Paul Hollingworth

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