Karachi, October 13, 2021 (PPI-OT): Banks: 3QCY21 earnings preview

We preview banking sector earnings for 3QCY21E, where we see bottom-line dwindling by 14% YoY during the quarter, owing to a higher base.

From our sample base, key outperformers in higher profitability growth will likely be UBL, ABL, BAFL and FABL over better performance in core income and lower credit cost (UBL and BAFL) as compared to the same period last year. We highlight, benefit of higher interest rates would not reflect in 3QCY21.

The sector’s Net Interest Income (NII) is expected to decrease slightly by 6% on a YoY basis where, among our Banking universe, FABL is expected to remain the key outperformer in core income growth.

We highlight limited or negative growth in BV should not be ruled out as a result of deterioration in surplus on revaluation on Available-for-sale securities as a result of ~30-90bps upward adjustment in benchmark rates of the government securities this quarter.

On Non-core income front, we anticipate Fee Income to continue to report double-digit growth (+18% YoY), owing to higher trade, consumer and remittances income.

Alongside the results, banks such as HBL, UBL, MCB, ABL, MEBL and FABL from our coverage will likely announce quarterly payouts.