Banks: NBP and HBL 3Q2013 result previews

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-The Board of Directors of National Bank of Pakistan (NBP) and Habib Bank Limited (HBL) are scheduled to meet on October 25, 2013 to announce their respective 3Q2013 results.

-NBP is expected to post 3Q2013 earnings of Rs4.2bn (EPS: Rs1.97), up 16%YoY and 40%QoQ. We do not anticipate any dividend announcement alongside the result. We maintain our ‘Hold’ call on NBP with a target price of Rs51.

-HBL’s 3Q2013 earnings are anticipated to clock in at Rs4.1bn (EPS: Rs3.04), a decline of 18%YoY and 17%QoQ. We do not expect HBL to announce any dividend with the result. We maintain our ‘Sell’ call on the stock with a target price of Rs105.

NBP to bounce back in 3Q2013, EPS expected at Rs1.97

We anticipate NBP’s 3Q2013 profitability to bounce back after a dismal 2Q2013 with earnings expected to clock in at Rs4.2bn (EPS: Rs1.97), up 16%YoY and 40%QoQ. (1) Lower provisions of Rs1.0bn, down 24%YoY and 83%QoQ and (2) higher non-interest income of Rs6.2bn, up 14%YoY, are likely to be growth drivers for the bottomline. That said, higher operating expenses of Rs9.1bn, up 6%YoY and 4%QoQ are expected to somewhat curtail the growth. As a result, cumulative 9M2013 earnings are likely to clock in at Rs11.0bn (EPS: Rs5.18), down 8%YoY. Lower Net Interest Income (NII) during the period due to lower spreads and higher provision and write offs have been the reasons for the decline in earnings. We maintain our ‘Hold’ call on the stock with a target price of Rs51 where we see no major triggers for the banking industry in the short term. Currently, NBP is trading at 2013E PE and PBV of 8.2x and 0.8x while it offers a dividend yield of 11%.

HBL: 3Q2013 EPS eyed at Rs3.04, down 18%YoY &17%QoQ

HBL is likely to witness a 12%YoY and 2%QoQ contraction in NII to Rs12.4bn in 3Q2013. That said, (1) better non-interest income of Rs3.3bn (up 17%YoY) and (2) lower cumulative provisions and write offs of Rs533mn (down 62%YoY) are likely to somewhat support the bottomline. Nevertheless, with rising operating expenses (up 22%YoY and 4%QoQ) we eye 3Q2013 earnings to come in at Rs4.1bn (EPS: Rs3.04), down 18%YoY and 17%QoQ. Consequently, 9M2013 earnings are anticipated to clock in at Rs13.5bn (EPS: Rs10.12), down 15%YoY mainly led by 10%YoY lower NII and higher operating expenses (up 14%YoY). The stock currently trades at a demanding 2013E PE and PBV of 10.7x and 1.5x, respectively and we maintain a ‘Sell’ stance on HBL with a target price of Rs105.

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