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Corporate Member: Karachi Stock Exchange (Guarantee) Ltd.
Corporate Office: 706, 7th Floor, Business Plaza, Mumtaz Hasan Road, Off. I.I. Chundrigar Road, Karachi. Tel:2412542-3 Stock Exchange Office: 441, 4th Floor, Karachi Stock Exchange Building, Stock Exchange Road, Karachi. Tel : 2432367 Email: firstname.lastname@example.org
February 3, 2005 BANKING SECTOR
The out look remains positive on account of: ? ? ? ? ? ? ? ? ? ? The rising T-bills rates With the stock market’s strong performance, banks are likely to book greater realized and unrealized gains Strong economic growth which is another triggering factor The year 2004, is the higher earnings year with the major portion of interest earnings. Banks have diverted major interest to consumer finance, agriculture loans and SME financing. Major reforms have been adopted to improve efficiency of the banks Deposits have recorded a growth of 46% during 2002-2003 Banks earning ratios have been improved Stable bank spreads Non-performing loans ratio is on declining track
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We recommend a Buy for the stock Expected Price range: Rs. 85 – 90
? The bank is trading at the discount of 20% to it’s fair value which is in the band of Rs. 85 – Rs. 90. ? Total income for the 9 months ended 30.09.04, consists of 60% net mark up income. ? Deposits have grown with 25% aggregating to Rs. 43.587 billion as at 3 quarters ended September 30, 2004. ? Advances have been increased from 18.344 billion (YE 31.12.03) to Rs. 30.381 billion (3QE 30.09.04). ? The bank contains 150.876 million NIT units in it’s portfolio which are secured by the government of Pakistan that if the banks continues to hold them upto 2006, the government will facilitate the redemption of these units at Rs. 13.70 per unit to mitigate the risk of adverse fluctuation. ? The bank has to increase it’s paid up capital upto 2 billion by the end of next year as per the SBP requirement, there is an attractive bonus expectation ? The expected earnings for the year ended December 31, 2004 may be Rs. 7.8 - Rs. 8 (diluted EPS after the incorporation 20% bonus declared after the announcement of the result for the 3Qtr ended) which means the growth of 75% as compared to the EPS of Rs. 4.57 for the last year ended December 31, 2003 (diluted for the bonus issue declared after the announcement of the result for the 3Qtr ended). We recommend a BUY for the stock on account of the attractive fundamentals and our valuations.
From: Zohra Jannat Ali
This report is produced by SC Securities (Pvt.) Ltd. and is only for the use of their clients. This document should be read in the investors’ own interest and it should not be consider as an offer for sale. The information contained is from sources believed reliable, we do no represent that it is accurate or complete and should not be relied upon as such.