Pakistan Banks’ Earnings to Fall 6% QoQ and Up 22% YoY in 2Q2024

Staff Report: Topline Banking Universe is likely to post an earnings growth of 22% YoY in 2Q2024, driven by higher Net Interest Income (NII) and Non-Interest Income.

NII of the banks in the Universe is likely to increase by 16% YoY to Rs282bn on the back of higher yields and volumetric growth. We believe that the impact of the 1.5% fall in the Policy Rate announced at the end of 2Q will be reflected from 3Q2024.

Non-Interest Income of the Topline Universe is also likely to post significant growth of 64% YoY in 2Q2024, mainly led by a significant jump in Non-Interest Income of United Bank (UBL). To recall, in the same period last year, UBL recorded a loss on securities to the tune of Rs4.3bn. However, in this outgoing quarter, we expect UBL to record a gain of around Rs10bn (as also witnessed in 1Q2024), as per our channel checks.

Total provision expenses of the Topline Universe are likely to clock in at Rs7.9bn in 2Q2024, which is 12% higher than last year’s Rs7.0bn in 2Q2023.

In the Topline Universe, Meezan Bank (MEBL) is likely to show the highest earnings growth of 52% YoY, followed by Bank Al Habib (BAHL) at 48% and Bank Alfalah (BAFL) at 19% YoY in 2Q2024.

On a QoQ basis, earnings in the banking universe are likely to decrease by 6%, mainly due to the implementation of ADR-rated tax.

Given the comfortable buffers above their respective minimum adequacy levels and robust profitability growth, banks will continue with a higher dividend payout. UBL will be an outlier, where we expect the bank to continue with a 100% payout (DPS Rs11/share) in 2Q2024.

We maintain a market weight stance on the banking sector, where Meezan Bank (MEBL) and Habib Bank (HBL) are our top picks,” Topline said.