Karachi, March 14, 2022 (PPI-OT): BAFL: From consolidation to growth!

BAFL has changed gears, moving towards growth from years of consolidation. The latest released financials are reminiscent of the same with bank’s deposit share reaching to 5.4% – the highest level since 3Q’17, courtesy addition of 106 branches in CY19-20 which have completed their gestation period.

The bank has always stood out from general industry trends, focusing more on basic banking (ADR: 61.4% as of Dec’21 – one of the highest in the industry) and not shying away from lending to riskier segments. We believe these segments would be the dominant avenues for financing growth in the medium run, putting bank at a significant advantage.

Earnings of the bank are likely to register a CY22-24F CAGR of 9.8% with growth initiatives burdening earnings potential in the medium run while longer run growth is expected to avg. at 17.6%. BAFL’s aggressive digital inroads would also fuel earnings momentum in the longer run, in our view.

We have a buy stance on the stock with Dec’22TP of PkR51.2/sh while given recent uncertainty surrounding Pakistan’s political and macro landscape, gradual accumulation is advised on dips.