MENAT BANKS-Summary of changes to ratings and target

Transcription

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Commercial Banks
MENA and Turkey
Global Research
 Abundant surplus capital plus domestic
growth constraints should encourage
ME banks to continue expansion into
Egypt and Turkey
MENAT BANKS
Growth options: domestic vs overseas
 However, based on valuation, we prefer
direct exposure to large listed Turkish
banks. Halkbank is our top pick
Summary of changes to ratings and target prices
Company Bloomberg Currency
QNB
Burgan
CAE
Bank Audi
ADCB
NBAD
FGB
UNB
Akbank
Garanti
Halkbank
Isbank
Vakifbank
YKB
QNBK QD
BURG KK
CIEB EY
AUDI LB
ADCB UH
NBAD UH
FGB UH
UNB UH
AKBNK TI
GARAN TI
HALKB TI
ISCTR TI
VAKBN TI
YKBNK TI
QAR
KWD
EGP
USD
AED
AED
AED
AED
TRY
TRY
TRY
TRY
TRY
TRY
CP
161.5
0.6
10.06
6
5.16
12.1
16.95
4.7
6.88
7.14
14.5
4.98
4.06
4.07
____ TP ____
Old New
185
0.67
13.5
7.2
5
11.27
14.8
4.67
12.7
13
28.5
9.2
8
7
200
0.67
13.5
6.8
5.4
12.7
17.9
5.2
9.3
10
23
6.2
5.3
5.4
__ Rating ___
Old New
OW
OW
N
N
OW
N
N
OW
OW
OW
OW
OW
N
N
OW
N
OW
N
N
N
N
N
OW
OW
OW
OW
OW
OW
Source: Bloomberg, HSBC Estimates
17 July 2013
Aybek Islamov*, CFA
Analyst
HSBC Bank Middle East Ltd.
+971 4 423 6921
[email protected]
Vikram Viswanathan*
Analyst
HSBC Bank Middle East Ltd.
+971 4 423 6931
[email protected]
Tamer Sengun*
Analyst
HSBC Yatırım Menkul Değerler A.Ş.
+90 212 376 46 15
[email protected]
Shirin Panicker*
Analyst
HSBC Securities Egypt S.A.E.
+202 2529 8439
[email protected]
 In MENA our preferred stocks are QNB,
Doha, BSF, Samba, CIB and CAE
Putting surpluses to work. We estimate that the ME banks
we cover are holding cUSD40bn in excess capital, equal to
20% of their combined market cap. Saturation of domestic
banking markets in the UAE, Qatar and Kuwait, and the
limited market size in Lebanon, should encourage many of
these banks to diversify earnings away from their home
markets. The increasing position as bilateral trade partners
with the ME region, coupled with their less-penetrated
banking markets, make Turkey and Egypt natural avenues
for such earnings diversification. Of the two, Egypt is a more
attractive and affordable market for a foreign entrant aiming
for a majority acquisition and above-COE returns, with a
minimum investment requirement of only USD2.4bn, on our
estimates, vs USD17bn for Turkey.
Halkbank (OW, TP TRY23) is our top pick. The recent sell-
off in Turkish banks, driven by a sharp increase in TRY
interest rates, presents a good long-term buying opportunity
for Turkish banks, in our view. Although we reduce our
target prices to capture the negative impact of higher TRY
rates on earnings and COE, we still see good value in the
banks, especially relative to MENA peers with existing
operations in Turkey (to which they are trading at a 30%
discount on a one year forward P/E). Halkbank has the
lowest ratio of fixed rate assets to interest earning assets
(31% in Q1 13), making it the most defensive in the face of
rising TRY rates.
Our preferred picks in MENA. We favour QNB (OW, TP
HSBC Global Research at: http://www.research.hsbc.com
*Employed by a non-US affiliate of HSBC Securities (USA) Inc,
and is not registered/qualified pursuant to FINRA regulations
Issuer of report: HSBC Bank Middle East Ltd
Disclaimer & Disclosures
This report must be read with the
disclosures and the analyst certifications
in the Disclosure appendix, and with the
Disclaimer, which forms part of it
QAR200) given its increased international exposure.
Meanwhile Doha Bank, CIB and CAE (all OW) are
attractive domestic growth stories. We upgrade CAE to OW
from Neutral on valuation. BSF and Samba (OW) in Saudi
are earning trough ROEs of c13% and trading at 1.1x BV
2014e. Both are defensive stocks with positive sensitivity to
potential increases in rates. Our OW-rated stocks are trading
at a 20% discount to CEEMEA banks on 2014e P/E.
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Commercial Banks
MENA and Turkey
17 July 2013
Contents
Investment summary
Which way to go?
3
12
Turkish Banks – interest rate
rally mostly priced in
23
MENA Banks
35
Abu Dhabi Commercial Bank
36
Alinma Bank
38
Alrajhi Bank
39
Arab National Bank
40
Bank Audi
41
Bank Muscat
43
Banque Saudi Fransi
45
Blom Bank
47
Burgan Bank
49
Credit Agricole Egypt
Qatar Islamic Bank
68
QNB
69
Riyad Bank
71
Samba
72
Union National Bank
73
Turkish Banks
75
Akbank
76
Garanti Bank
78
Halkbank
80
Isbank
82
Vakifbank
84
Yapi Kredi Bank
86
Valuations and risks
88
51
Disclosure appendix
124
Commercial International Bank
52
Disclaimer
127
Commercial Bank of Qatar
53
Doha Bank
55
First Gulf Bank
57
Kuwait Finance House
59
Masraf Al Rayan
61
National Bank of Abu Dhabi
63
National Bank of Kuwait
65
National Bank of Oman
67
2
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Commercial Banks
MENA and Turkey
17 July 2013
Investment summary
 The ME banks we cover carry cUSD40bn in surplus capital.
Mature GCC markets should encourage banks to diversify
earnings internationally
 We estimate full entry into Turkey would cost USD17bn in capital
commitment (vs USD2.4bn in Egypt). Coupled with relative
valuation levels, we therefore recommend direct investment
exposure to Turkey. Halkbank (OW, TP TRY23) is our top pick
 In MENA, we favour QNB (OW, TP QAR200) given its increased
international exposure. We also like Doha Bank, BSF, Samba,
CIB, and CAE (all OW) - a blend of domestic focus and attractive
valuation. We downgrade Burgan, ADCB and UNB to N from OW
on valuation. We upgrade CAE to OW from N, also on valuation
We estimate that the ME banks we cover are
holding cUSD40bn in excess capital , equal to
20% of their combined market cap. Saturation of
the domestic banking markets in the UAE, Qatar
and Kuwait, and the limited market size of
Lebanon, should encourage banks in these
countries to diversify earnings away from their
home markets, where we forecast asset growth to
slow to 10% pa over the next 5 years from 15% pa
during 2008-2012. The increasing position as
bilateral trade partners with the ME region,
coupled with their less-penetrated banking
markets, make Turkey and Egypt natural avenues
for such earnings diversification.
Sector surplus capital is cUSD40bn assuming a minimum
2015e CAR of 12% (USDbn)
7
6
5
4
3
2
1
NBAD
ADCB
QNB
Rajhi
Samba
FGB
Riyad
NBK
Alinma
UNB
BSF
Bank
Doha
ANB
Burgan
Masraf
Blom
NBO
ME banks holding cUSD40bn
in surplus capital
Source: HSBC estimates
In this report we look into three different ways
banks can achieve geographic diversification of
earnings: 1. Inorganic growth via acquisitions of
minority or associate stakes, 2. Inorganic growth
via majority acquisitions, and 3. Organic growth.
3
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Commercial Banks
MENA and Turkey
17 July 2013
Concentration of different markets. Loan market shares of
biggest bank by country
50%
40%
concentrated
fragmented
30%
balanced
20%
10%
Egypt
Turkey
Saudi
UAE
Kuwait
Oman
Qatar
0%
Source: HSBC Research, Central Bank and Company Data
Empirical evidence shows that share performance
of GCC banks has improved following an
acquisition in Egypt or Turkey. We look at key
acquisitions from banks based in Kuwait, Qatar
and UAE to measure average share price
performance. Our analysis shows that, on average,
share prices were up c25% during the six months
immediately after an acquisition. In contrast,
share prices were flat during the six months
immediately preceding an acquisition.
GCC banks' share price performance have shown significant
improvement post an acquisition
25%
20%
15%
10%
5%
Date of acquisition
30%
0%
amount of capital new entrants need to invest in
order to achieve above-COE returns in a market.
In Turkey, we estimate that a new entrant would
need to spend a minimum of USD17bn. The
USD17bn investment commitment includes the
acquisition cost of a small mid-tier bank
(cUSD2.3bn) together with the additional investment
required to raise the ROE of the acquired bank above
COE. There is no ME bank in our coverage which
could generate that amount of capital. Note that the
equivalent figure for Egypt would be only
USD2.4bn. We explain our calculations in the
"Which way to go?" section of this report.
Associate investment in Turkey is
more affordable but has a regulatory
capital cost
An alternative for a ME bank looking to diversify
its earnings internationally would be to acquire an
associate stake in a large listed Turkish bank.
However, investments in financial associates
carry higher regulatory capital costs as such
investments have to be fully deducted from Core
Equity Tier 1 capital. As a result, we conclude
that only three MENA banks could afford such an
investment without raising additional capital:
NBAD (N, TP AED12.7), ADCB (N, TP
AED5.4), and QNB (OW, TP QAR200). We
estimate that a 25% stake in a large listed Turkish
bank, requiring a capital commitment of
cUSD3.5bn, could enhance the 2014e ROE of the
buyer by 3 to 7 percentage points.
-5%
-12
-9
-6
-3
months pre-acqusition
3
6
9
12
months post-acqusition
Source: Bloomberg, HSBC estimates,
Note: we use average share price performance of Burgan, NBK, CBQ, ENBD and QNB
in our analysis, these banks are acquirers in Egypt/Turkey
Turkey requires much higher
capital commitment in a
majority acquisition scenario
The market structure, coupled with the
competitiveness of the existing banks, define the
4
Associate acquisition: potential EPS and ROE enhancement
2014e
Turkey
ADCB
NBAD
QNB
ROE
Adj.
ROE
Delta
(ppt)
3.5 11.9%
1.0 15.1%
-1.0 21.9%
18.7%
19.7%
24.6%
6.8
4.6
2.7
EPS Adj.EPS Delta
growth growth (ppt)
-0.3%
5.8%
18.1%
3.2%
6.8%
17.1%
We explain the assumptions underlying our EPS and
ROE impact calculations in the main section of this
report. We also conduct an analysis of a potential
associate acquisition in Egypt in this section.
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Commercial Banks
MENA and Turkey
17 July 2013
We recommend direct
investment exposure to
Turkish banks
The recent sell-off in the Turkish banks, driven by
a sharp increase in TRY interest rates, presents a
good long-term buying opportunity, in our view.
Although we reduce our target prices to capture the
negative impact of higher TRY rates on earnings
and COE, we still see good value in the banks,
especially relative to MENA peers with existing
operations in Turkey (to which they are trading at a
30% discount on a one year forward P/E).
We therefore recommend direct exposure to large
listed Turkish banks, rather than exposure through
ME banks with existing operations in Turkey. Our
top pick is Halkbank (OW, TP TRY23) as it has
the lowest ratio of fixed rate assets to interest
earning assets (31% in Q1 13), making it the most
defensive in the face of rising TRY rates.
ME banks with existing
exposure to Turkey
For those ME banks with existing operations in
Turkey we think that their valuations are currently
fair: KFH (UW, TP KWD0.64), NBK (N, TP
KWD1.02), Bank Audi (N, TP USD6.8) and CBQ
(N, TP QAR75). In the case of CBQ, we think
internal capital constraints post acquisition, and
the transition to Basel 3, will limit its potential to
scale up its Turkish operation.
We also downgrade Burgan Bank to Neutral from
Overweight, TP KWD0.67 (unchanged) on
valuation. In our view, Burgan's ROE
improvement, to c24% in 2015e from c19% in
2012, is already factored into the stock price,
which is up 51% yoy.
Egypt the best option for both
organic and inorganic growth
The fragmented nature of the banking market in
Egypt (more so than that of Turkey) makes it a
particularly attractive option for the
diversification of earnings of ME banks, in our
view. Entry should also cost much less: in terms
of a majority acquisition in Egypt, we calculate a
much lower investment commitment, of only
USD2.4bn.
We calculate that eight of our ME banks have the
required capital to make such an acquisition:
ADCB (N, TP AED5.4), FGB (N, TP AED17.9),
NBAD (N, TP AED12.7), NBK (N, TP
KWD1.02), QNB (OW, TP QAR200), Alrajhi
Bank (N, TP SAR77), Riyad (N, TP SAR27) and
Samba (OW, TP SAR67).
Furthermore, we calculate that such an acquisition
could enhance the 2015e ROE of the buyer by 1 to 3
percentage points. We use 2015e here given that
majority acquisitions take more time to enhance
shareholder value given the need for integration.
Majority acquisition in Egypt *: ADCB, FGB and NBK screen well
2015e
ADCB
FGB
NBAD
NBK
QNB
Rajhi
Riyad
Samba
EPS Adj.EPS Delta
growth growth (ppt)
-1.1%
11.7%
9.4%
9.2%
16.4%
17.7%
15.4%
26.6%
5.9%
14.8%
12.6%
12.6%
17.6%
19.2%
18.8%
28.4%
7.0
3.1
3.2
3.5
1.2
1.5
3.4
1.8
ROE
Adj.
ROE
Delta
(ppt)
11.1%
18.8%
14.8%
16.5%
22.3%
25.5%
12.4%
15.2%
14.2%
21.4%
16.8%
18.9%
23.5%
27.4%
14.5%
17.2%
3.1
2.6
2.0
2.4
1.2
1.9
2.1
2.0
Source: HSBC estimates * base case where assume asset growth of 45% p.a. We explain
required growth rate, EPS and ROE impact assumptions in the main section
Inorganic growth could be a catalyst
for several N-rated MENA banks…
It is interesting to note that six of the eight banks
listed above are currently Neutral-rated. Given the
potential EPS and ROE enhancement from an
Egyptian acquisition, we therefore see such a move
as a potential positive catalyst for these names.
5
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Commercial Banks
MENA and Turkey
17 July 2013
Of these six, NBK already has an Egyptian
subsidiary, but we think it could still benefit from
further investment in Egypt. Other banks with
existing Egyptian subsidiaries that could benefit
from further investment are UNB (N, TP
AED5.2), Blom Bank (OW, TP USD10.2) and
Bank Audi (N, TP USD6.8).
With regard to QNB, its acquisition of NSGB in
2012 should be immediately earnings accretive:
we expect it will add 9% to 2013 earnings and
enhance ROE by 150bp. We think QNB will use
recurring profits at NSGB to reinvest into the
existing business.
…but lack of extensive acquisition
experience abroad is a risk
It is worth noting that many of the listed banks
have little or no experience of making majority
foreign acquisitions. These include FGB, Samba,
Alrajhi, Riyad Bank, and NBAD.
We assume that, if these banks were to decide to
invest in Egypt, they may also consider organic
growth, by acquiring a local banking license.
The benefit of organic expansion is that it has a
lower capital impact and avoids integration issues.
The downside is that it is necessarily a
slower process.
MENA domestic-focused
stocks that we like: Doha,
Samba, BSF, CIB and CAE
Doha Bank (OW, TP QAR60). We estimate loan
growth will reach 20% pa during 2012-2014e up
from 9% pa during 2009-12. The recentlyconcluded rights issue of QAR1.5bn is sufficient to
fund such growth, we estimate. Our forecasts,
however, accommodate an additional QAR2.5bn
capital increase, per company guidance. We
estimate Doha’s EPS will grow 19% in 2014. Doha
is trading on a P-NAV of 1.1x (2014e) and a PE of
6
8.7x, below the equivalent CEEMEA banks’
average multiples of 1.6x and 10.2, respectively.
Samba (OW, TP SAR67). Samba has the second-
lowest funding cost among the Saudi banks we
cover, and the low cost-asset and cost-income
ratios, 1% and 29% respectively, mean that
earnings are strongly geared to any recovery in
revenues. We forecast EPS to grow 3% in 2013
and 12% in 2014. We estimate the NIM should
trough in 2013 at 2.25% before recovering to
2.33% in 2014 on an improving loan-asset ratio.
Bank Saudi Fransi (OW, TP SAR38). BSF's
fundamental advantage is its low cost-asset ratio
of 0.9% (the lowest among the Saudi banks we
cover). We estimate that corporate and retail loan
spreads have little room to fall further. This means
that BSF's pre-provision profitability, at 2.1% in
2013e and 2014e, is relatively safe in a sector
where revenues continue to be under pressure. In
addition, BSF has room to increase the payout
ratio to 52%, from the current 27%, without
compromising its capital ratios. Under such a
scenario, we estimate the dividend yield could
increase to 5% from 2%.
CIB (OW, TP EGP44). We estimate CIB has
cUSD300m in surplus capital. We view CIB as a
bank with good domestic growth potential and
expect it to deliver a 13% yoy increase in net
profit in 2013 despite the macro challenges in
Egypt. CIB is less sensitive to asset quality shocks
than it was 10 years ago.
CAE (upgrade to OW from N, TP EGP13.5). We
upgrade the stock to Overweight from Neutral on
valuation. CAE’s valuation multiples look
attractive given its resilient asset quality and
potential to cut costs. The stock is down 14%
year-to-date, and is now trading at 1.2x 2013e PNAV and offers an ROE of 20% in F&V. We
estimate that CAE will grow revenue faster than
costs, leading to an average cost-asset ratio of
Commercial Banks
MENA and Turkey
17 July 2013
abc
2.4% in 2013 and 2014, down from 2.6% in 2012.
We highlight that this is still higher than the
average cost-asset ratio of 1.7% for Egyptian
banks. The bank’s NPL ratio has been quite stable
and the coverage ratio remains strong at 197%
(Q1 2013).
We acknowledge the contribution of Neeraj
Bukalsaria* (Associate, Bangalore) and Pushpesh
Dutt* (Associate, Bangalore) in the preparation
of this report.
*Employed by a non-US affiliate of HSBC
Securities (USA) Inc, and is not
registered/qualified pursuant to FINRA
regulations
7
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Commercial Banks
MENA and Turkey
17 July 2013
HSBC vs. Consensus estimates (local currency)
HSBC Rating
Egypt
CIB
CAE
Kuwait
NBK
Burgan
KFH
Lebanon
Blom*
Audi
Oman
Muscat
NBO
Qatar
QNB
CBQ
QIB
Doha Bank
Masraf
Saudi**
Samba
ANB
Riyad
BSF
Alinma
Alrajhi
UAE
UNB
ADCB
NBAD
FGB
Turkey
Akbank
Garanti
Halkbank
IS Bank
Vakif
YKB
____ Consensus ratings _______ Consensus EPS___ _____ HSBC EPS _______ ___ HSBC vs.
Consensus ___
BUY
HOLD
SELL
2013e
2014e
2013e
2014e
2013e
2014e
OW
OW
11
5
10
3
0
0
4.15
1.74
4.76
1.92
3.76
1.53
4.04
1.75
-9%
-12%
-15%
-9%
N
N
UW
0
5
0
7
1
1
3
1
5
0.07
0.05
0.05
0.07
0.06
0.05
0.08
0.05
0.04
0.08
0.07
0.05
1%
4%
-4%
1%
11%
7%
OW
N
6
3
1
3
0
1
1.54
1526
1.61
1516
1.41
1364
1.57
1347
-8%
-11%
-3%
-11%
OW
N
13
6
2
3
0
0
0.07
0.04
0.08
0.04
0.07
0.03
0.07
0.03
-5%
-14%
-9%
-14%
OW
N
N
OW
UW
14
11
0
9
1
2
5
11
4
5
0
1
1
1
3
13.63
8.14
6.11
5.29
2.04
15.54
8.86
6.99
5.84
2.18
13.50
7.47
5.51
4.61
1.93
15.95
8.05
6.22
5.50
1.92
-1%
-8%
-10%
-13%
-5%
3%
-9%
-11%
-6%
-12%
OW
N
N
OW
N
N
15
11
9
10
4
13
3
5
9
6
4
6
0
1
0
0
0
0
5.27
2.99
2.44
3.61
0.68
5.68
5.69
3.40
2.70
3.91
0.95
6.42
4.97
2.88
2.44
3.40
0.67
5.74
5.56
3.20
2.60
3.85
0.84
6.31
-6%
-4%
0%
-6%
-2%
1%
-2%
-6%
-4%
-2%
-11%
-2%
N
N
N
N
10
5
0
11
1
7
13
6
0
2
1
1
0.63
0.50
1.08
1.48
0.67
0.57
1.18
1.70
0.65
0.48
1.09
1.45
0.70
0.48
1.15
1.60
3%
-3%
1%
-2%
3%
-16%
-2%
-6%
OW
OW
OW
OW
OW
OW
6
11
25
8
8
19
18
20
5
16
15
11
5
0
0
5
6
1
0.84
0.87
2.18
0.74
0.67
0.54
0.90
0.92
2.27
0.77
0.72
0.61
0.78
0.80
2.17
0.71
0.59
0.48
0.88
0.89
2.29
0.76
0.65
0.58
-7%
-8%
0%
-4%
-12%
-11%
-2%
-3%
1%
-1%
-10%
-5%
Notes: *Blom Bank’s EPS are in USD; **Saudi banks' HSBC EPS are before tax adjustment for consistency with Consensus forecasts. Our financial and valuation table shows EPS on a taxadjusted basis
Source: Bloomberg, HSBC estimates
8
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Commercial Banks
MENA and Turkey
17 July 2013
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9
10
Bank
Rep
Currency
Mcap
(USD bn)
Abu Dhabi banks
Abu Dhabi Comm Bank
First Gulf Bank
National Bank of Abu Dhab
Union National Bank
Weighted average
ADCB UH
FGB UH
NBAD UH
UNB UH
AED
AED
AED
AED
7.9
13.8
14.2
3.4
Egypt
Commercial International Bank
Credit Agricole Egypt bank
Weighted average
COMI EY
CIEB EY
EGP
EGP
2.9
0.4
Financial Stocks
Dubai Financial Market
EFG Hermes
Shuaa Capital
Weighted average
DFM UH
HRHO EY
SHUAA UH
AED
EGP
AED
4.1
0.6
0.2
Kuwait banks
Burgan Bank
Weighted average
BURG KK
KFIN KK
NBK KK
KWD
KWD
KWD
3.4
9.1
14.9
Lebanese Banks
Bank Audi
Blom Bank
Weighted average
AUDI LB
BLOM LB
LBP
LBP
Omani Banks
Bank Muscat
Weighted average
BKM OM
NBOB OM
Qatar banks
Qatar National Bank
Masraf Al-Rayan
Doha Bank Ltd
Qatar Islamic Bank
Commercial Bank Of Qatar
Weighted average
Saudi Banks
Arab National Bank
Al Rajhi
Alinma Bank
Banque Saudi Fransi
Riyad
Samba
Weighted average
CP
TP Rating
__________PE _________
2012
2013
2014
EPS CAGR
12-14e
_________ PB __________ _________ ROE _________ ____ Dividend Yield _____
2012
2013
2014
2012
2013
2014
2012
2013
2014
5.16 5.40 N
16.95 17.90 N
12.10 12.70 N
4.70 5.20 N
11.6
13.0
12.9
8.3
12.3
10.7
11.7
11.1
7.3
10.9
10.7
10.6
10.5
6.8
10.3
4%
11%
11%
11%
9%
1.4
2.0
2.0
1.0
1.8
1.3
2.0
1.7
0.9
1.7
1.3
1.9
1.5
0.8
1.5
13%
16%
17%
13%
15%
13%
17%
16%
13%
16%
12%
18%
15%
13%
15%
5%
5%
2%
3%
4%
5%
5%
3%
3%
4%
5%
6%
3%
4%
5%
33.88 44.00 OW
10.06 13.50 OW
10.2
6.8
9.8
9.0
6.6
8.7
8.4
5.7
8.1
10%
9%
10%
1.9
1.3
1.8
1.7
1.2
1.6
1.5
1.0
1.4
21%
22%
21%
20%
20%
20%
19%
21%
19%
4%
8%
4%
4%
8%
4%
4%
10%
5%
1.86 1.40 UW
8.73 16.00 OW (V)
0.71 0.70 N (V)
NA
32.0
NA
32.0
NA
13.6
NA
13.6
46.8
13.2
NA
42.4
NM
56%
NM
7%
7.2
2.0
0.7
6.3
6.4
9.6
0.7
6.6
5.7
5.5
0.7
5.5
0%
3%
-5%
0%
2%
25%
-1%
5%
4%
53%
1%
10%
0%
0%
0%
0%
0%
0%
0%
0%
1%
0%
0%
0%
0.60
0.68
0.93
0.67 N
0.64 UW
1.02 N
16.7
22.0
13.7
16.8
10.9
15.7
13.0
13.6
9.2
12.7
12.0
11.9
35%
32%
7%
19%
2.8
1.5
2.3
2.1
2.4
1.5
2.1
1.9
2.0
1.4
1.9
1.7
19%
7%
16%
13%
24%
11%
17%
16%
24%
11%
17%
16%
2%
1%
3%
2%
3%
2%
3%
3%
3%
3%
4%
3%
2.1
1.8
6.00 6.80 N
8.30 10.20 OW
6.4
5.6
6.0
6.7
5.9
6.3
6.7
5.3
6.1
-3%
3%
0%
1.0
1.0
1.0
1.0
0.9
0.9
0.9
0.8
0.8
15%
17%
16%
13%
15%
14%
12%
15%
13%
7%
5%
6%
6%
5%
6%
6%
6%
6%
OMR
OMR
3.3
0.8
0.59
0.27
8.2
7.4
8.1
8.5
8.7
8.6
7.8
8.0
7.9
3%
-4%
1%
1.1
1.0
1.1
1.0
0.9
1.0
0.9
0.9
0.9
14%
14%
14%
12%
11%
12%
13%
11%
12%
4%
6%
5%
4%
5%
4%
5%
6%
5%
QNBK QD
MARK QD
DHBK QD
QIBK QD
CBQK QD
QAR
QAR
QAR
QAR
QAR
31.0
5.7
3.4
4.5
4.9
OW
UW
OW
N
N
13.6
13.8
7.6
12.7
8.8
12.6
12.0
14.4
10.4
12.5
9.6
11.9
10.1
14.5
8.7
11.1
8.9
10.5
16%
-2%
-7%
7%
-1%
10%
2.4
2.1
1.3
1.4
1.2
2.1
2.4
2.0
1.2
1.4
1.2
2.1
2.1
1.9
1.1
1.3
1.1
1.8
18%
16%
18%
11%
14%
17%
20%
14%
14%
11%
12%
17%
22%
13%
13%
12%
13%
19%
4%
4%
9%
5%
8%
5%
4%
3%
7%
5%
8%
4%
4%
3%
7%
5%
8%
5%
ARNB AB
RJHI AB
ALINMA AB
BSFR AB
RIBL AB
SAMBA AB
SAR
SAR
SAR
SAR
SAR
SAR
7.1
30.1
5.6
7.9
9.9
12.1
N
N
N
OW
N
OW
13.8
16.0
27.2
10.6
11.2
11.4
14.7
13.4
14.7
20.8
10.4
10.6
11.0
13.4
12.1
13.4
16.5
9.2
9.9
9.9
12.0
7%
10%
28%
8%
6%
7%
10%
1.6
3.5
1.3
1.3
1.2
1.6
2.3
1.5
3.2
1.2
1.2
1.1
1.4
2.1
1.4
3.0
1.1
1.1
1.1
1.3
2.0
12%
23%
5%
13%
11%
14%
16%
11%
23%
6%
12%
11%
13%
16%
12%
23%
7%
13%
11%
13%
16%
3%
4%
0%
2%
5%
3%
4%
3%
5%
0%
2%
6%
3%
4%
4%
5%
0%
2%
6%
4%
4%
Source: Thomson Reuters Datastream, HSBC estimates, Priced as on 11th July 2013
0.72 OW
0.32 N
161.50 200.00
27.75 24.00
48.05 60.00
68.90 75.00
71.40 75.00
31.30
75.25
13.95
32.60
24.70
50.25
33.00
77.00
15.60
38.00
27.00
67.00
abc
BB
Code
Commercial Banks
MENA and Turkey
17 July 2013
CEEMEA Banks: valuation summary
Bank
BB
Code
Rep
Currency
Mcap
(USD bn)
CP
Nigerian banks
First Bank Of Nigeria
Guaranty Trust Bank
United Bank For Africa
Zenith Bank
Weighted average
FBNH NL
GUARANTY NL
UBA NL
ZENITHBA NL
South African Banks
ABSA
ABIL
Capitec Bank Hldgs
FirstRand
Nedbank
Standard Bank
Weighted average
Turkish banks
Akbank
Bank Asya
Garanti Bankasi
Halkbank
IS Bankasi
Albaraka Turk
Vakifbank
Yapi Kredi Bankasi
Weighted average
NGN
NGN
NGN
NGN
3.6
4.8
1.7
3.9
17.60
26.17
8.30
20.31
16.00
24.00
9.70
24.00
ASA SJ
ABL SJ
CPI SJ
FSR SJ
NED SJ
SBK SJ
ZAR
ZAR
ZAR
ZAR
ZAR
ZAR
10.3
1.3
2.3
16.1
8.8
17.5
142.90
15.80
196.60
28.55
173.00
107.83
169.00
33.00
226.00
33.00
217.00
118.00
AKBNK TI
ASYAB TI
GARAN TI
HALKB TI
ISCTR TI
ALBRK TI
VAKBN TI
YKBNK TI
TRY
TRY
TRY
TRY
TRY
TRY
TRY
TRY
14.1
0.8
15.3
9.3
11.5
0.8
5.2
9.0
6.88
1.71
7.14
14.50
4.98
1.82
4.06
4.07
9.30
2.90
10.00
23.00
6.20
2.75
5.30
5.40
Weighted average: Overall
Weighted average (MENA)
TP Rating
UW
UW
N (V)
OW
OW
OW (V)
OW
N
OW
N
OW
OW
OW
OW
OW
OW
OW
OW
_________ PE ______ EPS CAGR _________ PB __________ _________ ROE__________ ____ Dividend Yield _____
2012 2013e 2014e
12-14e
2012 2013e 2014e
2012 2013e 2014e
2012 2013e 2014e
7.6
8.9
5.0
6.6
7.4
7.3
10.1
5.6
7.4
8.1
6.7
10.3
5.4
7.2
7.9
6%
-7%
-3%
-4%
-2%
1.3
2.7
1.4
1.4
1.8
1.2
2.4
1.2
1.3
1.6
1.1
2.1
1.0
1.2
1.5
19%
34%
31%
23%
26%
17%
25%
22%
18%
21%
17%
22%
20%
17%
19%
6%
5%
6%
8%
6%
7%
4%
6%
8%
6%
7%
4%
7%
8%
6%
11.7
4.6
17.9
12.2
10.8
13.0
12.2
9.0
5.8
13.5
10.3
9.3
10.1
9.9
8.0
5.1
11.2
9.2
8.1
8.8
8.7
21%
-5%
26%
15%
16%
22%
18%
1.6
1.6
4.0
2.5
1.7
1.8
2.0
1.6
1.4
2.7
2.2
1.6
1.6
1.8
1.6
1.2
2.4
1.8
1.4
1.4
1.6
14%
20%
27%
21%
15%
12%
16%
17%
15%
24%
22%
16%
15%
18%
19%
16%
23%
21%
16%
15%
18%
5%
12%
2%
4%
4%
4%
4%
12%
9%
3%
5%
5%
5%
6%
6%
11%
4%
5%
6%
5%
6%
9.6
8.1
9.9
6.6
6.0
8.5
6.8
9.1
8.3
8.8
6.5
8.9
6.7
7.0
6.5
6.8
8.5
8.0
7.8
5.3
8.0
6.3
6.5
2.7
6.2
7.1
7.1
11%
24%
11%
2%
-4%
78%
4%
14%
8%
1.3
0.7
1.5
1.5
1.0
1.3
0.9
1.0
1.2
1.2
0.6
1.3
1.3
1.0
1.1
0.8
1.0
1.1
1.1
0.5
1.1
1.1
0.8
0.8
0.7
0.9
1.0
15%
8%
16%
26%
19%
17%
14%
13%
17%
14%
10%
15%
21%
14%
19%
12%
12%
15%
14%
11%
15%
19%
14%
34%
12%
13%
15%
2%
0%
2%
2%
2%
0%
0%
0%
2%
2%
0%
3%
3%
3%
0%
1%
2%
2%
2%
0%
3%
3%
3%
0%
1%
2%
2%
12.1
13.2
10.9
12.0
10.2
10.8
11%
10%
1.9
2.0
1.8
1.9
1.6
1.7
16%
16%
16%
16%
17%
17%
3%
4%
4%
4%
4%
5%
Commercial Banks
MENA and Turkey
17 July 2013
CEEMEA Banks: valuation summary (contd…)
Source: Thomson Reuters Datastream, HSBC estimates, Priced as on 7th July 2013
abc
11
abc
Commercial Banks
MENA and Turkey
17 July 2013
Which way to go?
 We calculate that ME banks have cUSD40bn of surplus capital to
deploy. Increasing trade flows between the GCC block and both
Egypt and Turkey make these countries attractive destinations for
ME banks' direct investment, in our view
 Inorganic growth via a majority stake is a natural choice if banks
seek fast access to meaningful market share. However, it would
require significant investment, especially in Turkey
 We examine various growth options for the banks we cover, and
the impact on EPS and ROE of various scenarios
12
Source: Central Banks, HSBC estimates
Egypt
Turkey
Saudi
120
105
90
75
60
45
30
15
Oman
For more details on the growing economic links
between MENA and Turkey please refer to our
economic research publication Turkey: linking up
Banking assets per capita are highest in Qatar and the UAE
(USD '000)
Lebanon
Despite the increases detailed above, however,
there remains significant potential for further
growth in trade between MENA and both Turkey
and Egypt. As at 2012, the share of frontier
markets we cover in Egypt’s bilateral trade
volume was 11%, and for Turkey it was still only
5% (albeit up from 2% six years ago).
The increased saturation of domestic banking
markets in the UAE, Qatar and Kuwait, and the
limited market size of Lebanon, should encourage
ME banks to venture out into faster growth
emerging markets.
Kuwait
The increase in bilateral trade flows between
MENA and Turkey, to USD21bn in 2012 from
USD5bn in 2006, creates a natural "follow your
client" route for MENA banks’ growth in the
Turkish market. Egypt is a similar example.
Bilateral trade between the ME and Egypt more
than doubled to USD10.6n in 2012 from
USD4.5bn in 2006.
… the high saturation of
MENA banking markets…
UAE
Increasing trade flows between
MENA, Turkey and Egypt
with MENA published on 1 February 2013 (Melis
Meitner et al).
Qatar
Changes in trade patterns…
abc
Commercial Banks
MENA and Turkey
17 July 2013
Egyptian and Turkish banking markets are less
crowded and offer more room for growth
(especially as their banking penetration levels are
still relatively low). Credit penetration in the ME
(in terms of loan-to-GDP ratios) varied between
75% and 160% in 2012. In Turkey, the loan-toGDP ratio in 2012 was much lower, at 53%. In
Egypt, it was only 33%.
Loan-to-GDP ratios: Turkey and Egypt have low penetration
ratios relative to ME countries (2012)
..imply a need for
diversification
Banks may naturally consider the following three
options for diversifying away from maturing
domestic markets:
 Acquisition of a minority or an equity
associate stake in a foreign bank
 Acquisition of a majority stake in a foreign bank
 Organic expansion in the foreign market
150%
We examine the pros and cons of all three
approaches in relation to the ME banks we cover,
and specifically in terms of expansion into Turkey
and Egypt.
120%
90%
60%
30%
Egypt
Turkey
Saudi
UAE
Oman
Lebanon
Kuwait
Qatar
0%
Source: Central Banks, HSBC estimates; ratio for GCC countries is based on non-oil GDP
…and surplus capital…
We estimate that the ME banks we cover are
carrying cUSD40bn in surplus capital. We
measure the size of surplus capital as the capital
over and above a 12% capital adequacy ratio
(CAR) which we use this as a minimum target for
a GCC bank. We use 2015e CAR as a benchmark
as this accommodates three years of growth in
domestic risk-weighted assets.
Sector surplus capital is USD40bn assuming a minimum
2015e CAR of 12% (USDbn)
7
6
5
4
3
2
1
NBAD
ADCB
QNB
Rajhi
Samba
FGB
Riyad
NBK
Alinma
UNB
BSF
Muscat
Doha
ANB
Burgan
Masraf
Blom
NBO
-
13
abc
Commercial Banks
MENA and Turkey
17 July 2013
Improving trade flows with Egypt and Turkey
GCC trade activity with Egypt & Turkey (CAGR, 2007-12)
80%
30%
25%
60%
20%
40%
15%
10%
20%
5%
0%
0%
Oman
Qatar
U.A.E
Egy pt (LHS)
Kuw ait
 The GCC block has increased trade volumes with Turkey by
2.7x, and with Egypt by 2.3x, in the last five years
 Oman (+75%) and Qatar (+70%) have outperformed within the
GCC (+ 43%) in trade activity with Egypt
 The UAE, Oman and Saudi have increased trade activity the
most with Turkey growing 26%, 23% and 21%, respectively,
versus average GCC growth of 18%
 Oman and the UAE have increased trade activity with both
Egypt and Turkey by levels in the high double digits (+75% in
Egypt and +23% in Turkey for Oman; +34% and +26%,
respectively, for the UAE)
Saudi
Turkey (RHS)
Source: Central Banks, state statistics Note: trade activity = exports + imports
Source: Central Banks, state statistics Note: trade activity = exports + imports
Distribution of trade activity with Turkey among the GCC, Lebanon and Nigeria
 The UAE and Saudi are the largest trade partners for Turkey
Saudi
within MENA
28%
 The UAE has tripled its trade share with Turkey in the last six
Oman
years; Oman, Saudi Arabia and Nigeria have doubled theirs
2%
 In absolute terms, the UAE and Oman have increased trade
activity faster than the frontier average
Nigeria
 The UAE and Qatar have both increased exports and reduced
U.A.E
3%
imports. Qatari exports increased by an impressive 16x over
2006-12
56%
Kuw ait
 Nigeria and Oman have increased import activity the most in
the last 5 years
3%
Qatar
3%
Lebanon
5%
Source: Central Banks, state statistics
Distribution of trade activity with Egypt among the GCC and Lebanon
U.A.E
Qatar
 Saudi, Kuwait and the UAE are the largest trade partners with
Egypt in MENA
16%
4%
 Oman and Qatar have improved their trade share with Egypt
the most (7-8x) over the last 6 years. The UAE has doubled its
Kuw ait
share
 In absolute terms, Omani and Qatari exports increased by 44x
33%
and 11x, respectively, over 2006-2012
 GCC exports to Egypt increased faster (2.6x) than imports
(1.8x) during the last five years
 Qatari imports grew 17x, outperforming the average GCC
growth of 1.8x over 2007-12
Bahrain
Saudi
1%
Oman
2%
14
44%
abc
Commercial Banks
MENA and Turkey
17 July 2013
Which way to go?
Purchase of a minority or an
associate stake
This route incurs a higher regulatory capital cost
relative to the other routes. This is because the
acquiring bank needs to deduct 100% of the
purchase cost of the financial minority or
associate from its Tier 1 capital. The other
downside aspect to this route is that the acquirer
does not have full control of its investment.
The table below illustrates the hypothetical impact
on the acquirer's capital of a majority acquisition
compared to an associate/minority acquisition.
Associate acquisition is more punitive on regulatory capital
relative to a majority acquisition
USDm
Stake (%)
Parent RWA (pre-acquisition)
Target RWA
Parent Tier 1 (pre acquisition) – A
Parent Tier 1 (pre-acquisition) %
Target - book value of equity
Acquisition multiple (P-NAV)
Deal value – C
Goodwill – B
Parent Tier 1 (post acquisition) (A-B)
Parent Tier 1 (post acquisition) (A-C)
Parent RWA (post acquisition)
Tier 1 (post-acquisition)%
Majority Associate
Acquisition acquisition
100%
10,000
3,000
2,000
20%
600
1.5x
900
300
30%
10,000
10,000
2,000
20%
2,000
1.5x
900
-
1,700
13,000
13%
1,100
10,000
11%
On a positive note, by going the associate route, a
purchasing bank can avoid the burden of
integration risks, as well as the costs associated
with controlling the acquisition, while at the same
time receiving its share of earnings and dividends.
Impact of associate investment on banks we
growth rates for 2014. In the case of Turkey the
ROI is equivalent to Turkish COE of 13%. In the
case of Egypt, the ROI of 13-14% falls
substantially below Egypt's COE of 18%.
Egypt’s near-term net income growth is higher than Turkey’s
given the recovery that we model from current depressed levels
2013e
We conclude that return on investment (ROI) for
a ME bank would approach 12-13% in Turkey
and 13-14% in Egypt, in the first year (2014) after
purchase of an associate stake, based on the
current valuations and ROEs of listed banks in
those two markets, and our sector net profit
Turkey
16%
15%
9%
15%
1.6
8.7
1.1
8.0
Net income growth
2012-15e
2015e-17e
Valuations
Average P-NAV
Average PE
Source: HSBC estimates, Notes: numbers are market-cap weighted
However, if we look out 5 years post acquisition,
the ROI improves over time, reaching 18% in
Turkey and 22% in Egypt. The greater
improvement in the Egyptian ROE is explained by
the strong earnings recovery potential from the
current depressed levels. We again use our sector
net profit growth rate for 2015, and thereafter
assume 15% pa growth in both markets (we
ignore exchange rate volatility in the forecast
period). The payback period is quite short, at 4-5
years, based on our estimates.
Associate investment: ROI in both Turkey and Egypt
improves over time, driven by fast earnings growth
24%
22%
20%
18%
Egy pt COE = 18%
16%
14%
12%
Turkey COE = 13%
10%
2013e
2014e
2015e
Turkey
cover: NBAD, ADCB and QNB screen well in
Turkey; UNB, Bank Muscat and Doha in Egypt
Egypt
2016e
2017e
Egy pt
The potential impact of a new associate
investment on a ME bank's ROE is a function of
the surplus capital the bank has to invest and the
level of profits expected from the associate. On
our calculations, a 25% stake in a large Turkish
15
abc
Commercial Banks
MENA and Turkey
17 July 2013
Associate acquisition: only NBAD, ADCB and QNB can afford an
associate investment in Turkey, Grey-shaded cells indicate
banks which screen best
2014e
EPS Adj.EPS Delta
growth growth (ppt)
ROE
Adj.
ROE
Delta
(ppt)
Turkey
ADCB
NBAD
QNB
-0.3%
5.8%
18.1%
3.2%
6.8%
17.1%
3.5 11.9%
1.0 15.1%
-1.0 21.9%
18.7%
19.7%
24.6%
6.8
4.6
2.7
Egypt
ADCB
Alinma
Bank Muscat
BSF
Doha
FGB
NBAD
NBK
QNB
Rajhi
Riyad
Samba
UNB
-0.3%
25.7%
10.5%
13.3%
19.4%
10.6%
5.8%
8.7%
18.1%
10.0%
6.6%
11.7%
7.4%
0.5%
21.6%
10.0%
12.7%
17.4%
10.4%
5.9%
8.6%
17.8%
9.9%
6.6%
11.4%
7.4%
0.8
-4.1
-0.5
-0.5
-2.0
-0.2
0.1
-0.1
-0.3
-0.1
0.1
-0.3
0.0
13.3%
8.6%
15.2%
13.8%
15.9%
19.5%
16.1%
17.9%
22.5%
24.2%
12.3%
14.1%
15.3%
1.4
1.7
2.6
1.2
2.5
1.2
1.0
1.2
0.6
0.9
1.0
0.9
2.3
11.9%
6.9%
12.6%
12.6%
13.4%
18.3%
15.1%
16.7%
21.9%
23.3%
11.3%
13.2%
13.0%
The impact on earnings growth in 2014, however,
would be quite muted in both Turkey and Egypt
16
7
6
5
4
3
2
1
0
Egy pt
Doha
BSF
UNB
NBK
Alinma
FGB
Riyad
Rajhi
Samba
QNB
ADCB
Turkey
Bank Muscat
In terms of the impact on 2014e ROE and EPS
growth, NBAD, ADCB and QNB should all see
their ROE improve post an acquisition in Turkey,
with ADCB screening the best (an uplift of c7ppts
in 2014). With regard to acquisitions in Egypt, it
is the smaller acquiring banks which should
benefit the most due to the proportionately larger
size of the target banks. Doha, Muscat and UNB
screen best here: we see their ROEs improving by
2-3% (see table below).
Surplus capital (USDbn): 13 GCC banks could make an
associate acquisition in Egypt versus 3 in Turkey
NBAD
Based on these figures, only NBAD, ADCB and
QNB could maintain a 12% CAR after taking a
25% stake in a large Turkish Bank. In Egypt,
thirteen banks – NBAD, ADCB, QNB, Al Rajhi,
Samba, FGB, Riyad, NBK, Alinma, UNB, BSF,
Bank Muscat, and Doha – could achieve this.
(with the exception of ADCB) as only 25% of net
income would be recognised by the parent company.
The amount of capital dilution for an acquiring
bank depends on the size of its own capital base at
the time of the acquisition. The capital dilution is
naturally greater for a smaller bank.
Associate acquisition: correlation between capital dilution
and bank size is inverse in nature (2012)
0.0%
140
-0.5%
120
-1.0%
100
-1.5%
-2.0%
80
60
-2.5%
40
-3.0%
20
-3.5%
0
QNB
Samba
NBAD
Riyad
BSF
FGB
NBK
ADCB
ANB
Muscat
UNB
CBQ
Alinma
Burgan
Doha
Blom
Masraf
NBO
bank would require a capital commitment of
cUSD3.5bn, with the equivalent figure in Egypt
being cUSD700m. In Turkey we calculate average
market capitalisation of the six largest banks. In
Egypt we use CIB as a benchmark.
change in CAR (<<)
Asset size (USDbn) (>>)
Purchase of a majority stake
The level of surplus capital of ME banks means
that they could comfortably acquire controlling
stakes in small-to-mid tier banks in Egypt and
Turkey. However, improving shareholder value
over time to raise the ROE of the acquired bank
above the level of COE would require additional
capital. The additional capital would help in
expanding the branch network, adding new staff,
abc
Commercial Banks
MENA and Turkey
17 July 2013
2. The large state-owned banks are relatively passive
in the lending market, in contrast to Turkey where
the large banks are major competitors.
introducing new products and services and in
improving technology. We assume that acquiring
banks would look at a 5-year time horizon within
which they would seek to scale up a small-to-mid
tier bank into a larger one.
More than 40% of Egypt’s banking assets are owned by the
Govt., either directly or indirectly
2012 Market Shareholder
Assets share
(USDm)
Key Turkish and Egyptian banks: controlling shareholder
stakes (names in boxes) and free floats
Bank
100%
National Bk of Egypt
Banque Misr
Banque du Caire
PBDA
Egypt Arab Land Bk
Control stake
Credit Agricole
Total
80,365
46,961
13,250
8,285
5,000
24%
14%
4%
2%
1%
153,860
45%
Ministry of Finance
Govt. of Egypt
Banque Misr
Ministry of Finance
Ministry of Finance
100%
100%
100%
100%
100%
Source: Companies, Central Bank
On our estimates, none of the GCC banks could
afford a USD17bn investment. NBAD’s surplus is
the largest, and that is still only USD6.9bn.
CAE
QNB
CIB Actis
Free float
NSGB
NBG
Govt.
Finans
Vakif
KOC
Yapi
Sabanci
Ziraat
Garanti
Isbank
0%
Akbank
20%
BBVA
Ataturk
40%
Halk
Govt
60%
Basbakalink
80%
Stake
Other
Source: Bloomberg, Company data, HSBC Research, Note: ‘Other’ stakes include
minority holdings and portfolio investments
However, the lower capital commitment in Egypt
means that eight banks (see table on following
page) could afford a majority acquisition.
Moreover, we calculate that such an acquisition
should on average improve ROE by 250bp over
three years. ADCB, FGB and NBK should see the
most improvement, of 310bp, 260bp and 240bp,
respectively.
On our calculations, the initial investment plus the
‘build-out’ would require a total capital
commitment of cUSD17bn in Turkey and
cUSD2.4bn in Egypt (see table on following
page). We see two reasons for the lower capital
requirement in Egypt:
It would also result in an improvement in earnings
growth across the board (for an average of 350bp)
since it is a majority acquisition. ADCB, NBK,
Riyad and FGB screen best for improvement in
earnings growth.
1. The Egyptian private banking sector is more
fragmented. For example, CIB’s assets are equal
to only one third of the assets carried by the
largest public sector bank in the country.
Turkey
CIB
Yapi Kredi
Garanti
Akbank
BSF
IS Bank
Riyad
Samba
FGB
ADCB
NBAD
ENBD
Gulf Bk
Burgan
KFH
NBK
Sohar
NBO
HSBC Oman
Muscat
Egypt
Saudi
Oman
QIB
Doha
CBQ
QNB
Qatar
CAE
UAE
Kuw ait
Faisal
Balanced markets
NSGB
Concentrated markets
Alrajhi
50%
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
Fragmented markets
Market concentration by share of customer lending. Egyptian market more fragmented; Turkey and the GCC more concentrated
Source: Company data, HSBC estimates
17
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Commercial Banks
MENA and Turkey
17 July 2013
Majority acquisition in Egypt*: ADCB, FGB and NBK screen well
Minimum asset growth requirement for target
2015e
ROE enhancement is also lower in Egypt
ADCB
FGB
NBAD
NBK
QNB
Rajhi
Riyad
Samba
EPS Adj.EPS Delta
growth growth (ppt)
-1.1%
11.7%
9.4%
9.2%
16.4%
17.7%
15.4%
26.6%
5.9%
14.8%
12.6%
12.6%
17.6%
19.2%
18.8%
28.4%
7.0
3.1
3.2
3.5
1.2
1.5
3.4
1.8
ROE
Adj.
ROE
Delta
(ppt)
11.1%
18.8%
14.8%
16.5%
22.3%
25.5%
12.4%
15.2%
14.2%
21.4%
16.8%
18.9%
23.5%
27.4%
14.5%
17.2%
3.1
2.6
2.0
2.4
1.2
1.9
2.1
2.0
Source: HSBC estimates Note: * base-case where we assume asset growth of 45% p.a. We
explain our growth rate assumption in the next section
Historical data on acquisitions in Turkey and
Egypt support our analysis. Majority acquisitions
have been more common in Egypt than in Turkey.
In fact, all of the GCC bank acquisitions in Egypt
have been of a controlling stake. The most recent
examples are QNB and Emirates NBD, both of
whom acquired majority stakes in Egyptian banks
during 2012.
In contrast, in Turkey, GCC banks have been just
as likely to acquire a banking license as to make a
majority acquisition (see section on organic
growth for more details).
Majority acquisitions more common in Egypt than in Turkey
Target bank
Acquiring bank Year
TURKEY
Alternatifbank
CBQ
Bank Audi
Odebank
Eurobank Tekfen
Burgan
NBK
Turkish Bank
Katilim Bank
NCB
Albaraka Turk
Al Baraka
KFH
Kuveyt Turk
EGYPT
NSGB
QNB
BNP Paribas
ENBD
Al Watany
NBK
ADIB
Natl Devlpt Bank
Bank of Alexandria
Italy's Sanpaolo Bank
UNB Egypt
UNB
Ahly United Bank Egypt
Ahly United
Audi
Cairo Far East Bank
Credit Agricole Egypt Bank Credit Agricole S.A.
Misr Romanian Bank
Blom
MIBank
NSGB
Arab African Int'l Bank
Misr America Int'l Bank
Al Baraka Bank Egypt
Al Baraka
Egyptian Commercial Bank
Piraeus
Source: Company data
18
Type
2013
2012
2012
2007
2007
n/a
n/a
Majority
Greenfield
Majority
Associate
Majority
Greenfield
Greenfield
2012
2012
2007
2007
2006
2006
2006
2006
2006
2005
2005
2005
na
2005
Majority
Majority
Majority
Majority
Majority
Majority
Majority
Majority
Majority
Majority
Majority
Majority
Majority
Majority
In terms of the difference in levels of profitability
between small banks and large banks, the gap is
similar in both Egypt and Turkey. In Turkey, for
example, the large banks (>USD80bn in asset size)
have an average ROE of 16%, 300bp higher than the
13% of their smaller peers. The difference in return
is largely due to lower cost-asset ratios and provision
expenses at larger banks.
Du Pont analysis indicates larger banks* in both Egypt and
Turkey have lower cost-asset ratios
Turkey
Turkey
Egypt
Egypt
Large bank Small bank Large bank Small bank
% of assets
Net int. income
Fees Inc
Trading Inc.
Other Inc
Total income
Not int. exp.
Core income
Provisions
Non-op items
Pre-tax income
Tax rate
ROA
Asset/Equity**
ROE
3.9%
1.1%
0.3%
0.5%
5.7%
2.2%
3.5%
0.9%
-0.2%
2.5%
21.7%
2.0%
8.3
16.4%
4.9%
1.2%
0.1%
0.4%
6.6%
3.2%
3.4%
1.6%
0.0%
1.8%
21.4%
1.4%
9.7
13.3%
4.4%
1.0%
0.6%
0.0%
6.0%
1.7%
4.2%
0.5%
-0.1%
3.4%
27.7%
2.5%
9.2
22.8%
3.8%
1.0%
0.2%
0.5%
5.5%
2.4%
3.1%
0.7%
-0.2%
2.4%
26.4%
1.8%
9.2
16.6%
Source: company data, Note: * large Turkish bank = assets >USD80bn, large Egyptian bank
= assets >USD15bn * *normalised asset/equity ratio,
In order to close the gap, the acquiring banks have
to ensure that their smaller acquisitions grow faster
than the sector average in order to catch up with the
larger banks in terms of profitability over time. We
estimate the required growth rate in terms of assets
works out to be 63% pa (over 5 years) in Turkey
and 45% pa in Egypt.
abc
Commercial Banks
MENA and Turkey
17 July 2013
Impact of majority acquisition in Egypt assuming 30% pa growth
in assets
Egyptian banks require a lower capital commitment, the
minimum required growth rate is also lower
USDm
Egypt
Turkey
Assets: small bank (2012)*
Target assets (2017e) **
Required growth pa
4,325
29,092
46%
15,365
174,515
63%
Existing capital base – A
Internal capital generation (20122017e) – B
Available capital – (A+B)
Required capital – C
New capital: C – (A+B)
392
586
2,320
3,101
978
3,349
2,371
5,422
22,659
17,238
Assumptions
Industry growth pa
Average ROA
Average dividend payout ratio
15%
1.5%
50%
Source: HSBC estimates, Note *average of seven small listed banks in Turkey, in Egypt we
use CAE as a benchmark, ** we derive this by growing assets in large listed banks at 15%
p.a. over 5 years using 2012 assets as the base in both Egypt and Turkey
The lower required growth rate in Egypt is
explained by the highly fragmented nature of the
market: a large listed Egyptian bank is only 3 times
larger than a smaller one, in contrast to Turkey
where the equivalent ratio is 6 times.
It is easier to scale up a small bank in Egypt than in Turkey
(assets in USDbn)
160
145
130
115
100
85
70
55
40
25
10
(5)
Egy ptian banking
sy stem is more
fragmented
Egy pt
Small bank
Turkey
Large bank
Source: company data, HSBC estimates
However, 45% pa is still a very fast pace at which to
grow assets. Yet, even if we assume asset growth of
only 30% pa, a majority acquisition in Egypt still
has a positive effect on both ROE and EPS growth
for the eight banks we believe could afford one. As
shown in the table below, the average improvement
in earnings growth declines to 200bp from 350bp,
and the average improvement in ROE declines to
170bp from 250bp.
2015e
ADCB
FGB
NBAD
NBK
QNB
Rajhi
Riyad
Samba
EPS Adj.EPS Delta
growth growth (ppt)
-1.1%
11.7%
9.4%
9.2%
16.4%
17.7%
15.4%
26.6%
2.7%
13.1%
10.8%
10.7%
16.8%
18.3%
16.7%
26.9%
3.7
1.3
1.4
1.6
0.4
0.5
1.3
0.3
ROE
Adj.
ROE
Delta
(ppt)
11.1%
18.8%
14.8%
16.5%
22.3%
25.5%
12.4%
15.2%
13.3%
20.6%
16.2%
18.2%
23.1%
26.8%
13.9%
16.6%
2.2
1.8
1.4
1.7
0.8
1.3
1.5
1.4
Organic expansion
The third option is organic expansion by acquiring a
local banking license. A typical route is to establish a
representative office before commencing fullyfledged banking operations. However, the
availability of new banking licenses is very countrydependent. In Egypt, the last new banking license
was issued about 30 years ago. In contrast, in
Turkey, it is much easier to get a new banking
license. The most recent example is Bank Audi,
which acquired a Turkish banking license for
USD300m and started operations in H2 2012.
Previously, Al Baraka in Bahrain and KFH in
Turkey also started green-field operations in Turkey.
On the upside, organic expansion has limited
capital impact and carries no downside risk from
legacy assets. On the other hand, it is time
consuming (in terms of achieving critical mass
and a decent ROI) and it is also neither earningsnor ROE-accretive on an immediate basis due to
the high start-up expenditure and the additional
resources required to create a new brand name (or
roll-out an existing one). The Turkish operations
of Bank Audi made a net loss in Q1 2013 and are
not expected to break-even in the first year.
19
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Commercial Banks
MENA and Turkey
17 July 2013
Organic expansion into overseas markets requires little
capital but is slow to scale
Organic expansion
Pros
•
Limited capital
requirement
•
Absence of legacy
assets
•
Integration risks are
absent
Cons
1. Not earnings or ROE
accretive
immediately
2. Returns below COE
over medium term
3. Lack of scale to
compete with larger
banks
Source: HSBC Research
We expect regulators’ stance to be positive
whatever the route of expansion
The Central Bank of Turkey appears to favour
competition, as evidenced by the following:
1. The recent fine on larger banks for engaging in
anti -competitive practices
2. Larger Turkish banks are subject to lending
caps indicating that the central bank is not
opposed to smaller banks growing faster than the
sector average
3. The central bank has granted at least two new
banking licenses in the last year.
These factors are positive for smaller banks
looking to scale up over time.
We think the Central Bank of Egypt will likewise
encourage competition in the banking sector given
the current dominance of the state-owned banks,
which largely purchase government bonds and do
not intermediate in the lending market.
20
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Commercial Banks
MENA and Turkey
17 July 2013
Shareholding structure of Egyptian banks (USDm) (2012)
Bank Name
Assets Equity Net Profit
Loans Main shareholder
Domicile
Stake
National Bank of Egypt
Banque Misr
Commercial Intl Bank
NSGB
Banque du Caire
Arab African Intl Bank
Bank of Alexandria
Faisal Islamic Bank
PBDAC
Credit Agricole
Arab International Bank
Housing and Devpt Bank
Egyptian Arab Land Bank
Bank Audi
Al Watany Bank
Barclays Bank
Suez Canal Bank
Al Baraka Bank of Egypt
SAIDB
BNP Paribas
Export Devpt Bank of Egypt
National Development Bank
Ahli United Bank
Piraeus Bank- Egypt
Misr Iran Devpt Bank
Blom Bank- Egypt
Egyptian Gulf Bank
Arab Banking Corporation
Union National Bank
IDAB
The United Bank
49,455
28,899
14,464
9,699
8,154
7,437
6,325
5,566
5,098
4,325
3,800
3,433
3,077
2,892
2,765
2,717
2,625
2,581
2,572
2,523
2,147
2,101
1,978
1,711
1,476
1,386
1,326
845
837
388
n/a
14,656
6,686
6,261
5,601
3,231
4,171
2,988
867
2,136
1,989
1,363
997
1,846
1,431
1,114
1,014
775
1,204
656
932
916
661
1,277
492
n/a
455
495
212
404
n/a
615
Egypt
Egypt
UK
Qatar
Egypt
Egypt
Italy
Egypt
Egypt
France
Egypt
Egypt
Egypt
Lebanon
Kuwait
UK
Egypt
Bahrain
Egypt
UAE
Egypt
UAE
Bahrain
Greece
Iran
Lebanon
Egypt
Jordan
UAE
Egypt
Egypt
100%
100%
9%
97%
100%
49%
70%
15%
100%
47%
39%
30%
100%
100%
99%
100%
41%
74%
46%
100%
23%
50%
85%
95%
40%
99%
15%
98%
95%
100%
100%
2,101
1,892
1,665
1,292
246
771
660
334
278
358
713
365
462
212
280
264
285
158
232
311
245
86
170
128
230
154
189
131
126
78
154
433
109
342
241
111
139
96
30
5
72
26
23
n/a
39
47
27
n/a
21
28
41
2
(91)
30
(14)
44
5
21
5
5
1
n/a
Ministry of Finance
Government
Actis
QNB
Banque Misr
Central Bank of Egypt
Intesa Sanpaolo Group
Egyptian Endowment Authority
Ministry of Finance - Egypt
Group Credit Agricole
Government of Egypt
State Authority
Ministry of Finance - Egypt
Bank Audi
Barclays Bank
Al Baraka Banking Group
Emirates NBD
Banque Misr
Abu Dhabi Islamic Bank
Ahli United Bank
Piraeus Bank Group
Iran Foreign Invst Company
BLOM Bank
Sons of Mohammed Mahmoud
Arab Banking Corporation
Union National Bank
Ministry of Finance
Central Bank
ROA
ROE
0.9% 20.6%
0.4%
5.8%
2.4% 20.6%
2.5% 18.7%
1.4% 45.0%
1.9% 18.0%
1.5% 14.6%
0.5%
9.0%
0.1%
1.9%
1.7% 20.2%
0.7%
3.6%
0.7%
6.3%
n/a
n/a
1.3% 18.2%
1.7% 16.7%
1.0% 10.1%
n/a
n/a
0.8% 13.2%
1.1% 12.2%
1.6% 13.2%
0.1%
0.8%
-4.3% -106.5%
1.5% 17.6%
-0.8% -11.3%
3.0% 19.1%
0.3%
3.1%
1.6% 11.4%
0.6%
4.1%
0.6%
4.0%
0.2%
0.8%
n/a
n/a
Source: Companies, Note: PBDAC is the Principal Bank for Development and Agricultural Credit, SAIDB is the Societe Arabe Internationale de Banque, and IDAB is the Industrial Development
and Agricultural Bank of Egypt. There are 40 banks in Egypt and the above list excludes foreign bank branch offices.
21
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Commercial Banks
MENA and Turkey
17 July 2013
GCC acquisitions in Egypt and Turkey
Acquirer
Target
Date
Stake
BNP Paribas (Egypt)
NSGB (Egypt)
National Devpt. Bank (Egypt)
Al Watany Bank (Egypt)
Cairo Far East Bank (Egypt)
Misr Romanian Bank (Egypt)
Egypt Saudi Finance Bank (
Alexandria Commercial & Maritime Bank
Dec 2012
Dec 2012
Nov 2007
Aug 2007
Mar 2006
Dec 2005
n/a
n/a
95%
97%
49%
98%
100%
97%
n/a
n/a
Alternatif Bank (Turkey)
Eurobank Tekfen (Turkey)
Turkish Bank (Turkey)
Katlim Bankasi (Turkey)
Albaraka Turk (Turkey)
Kuveyt Turk (Turkey)
Mar 2013
Apr 2012
Jul 2007
Jul 2007
75%
99%
40%
60%
Value (USDm) Implied P-NAV
Implied PE
Egypt
Emirates NBD
Qatar National Bank
Abu Dhabi Islamic Bank
Bank Audi
Blom Bank
Al Baraka Group
Union National Bank
Turkey
Commercial Bank of Qatar*
Burgan Bank
National Commercial Bank
Al Baraka Banking Group
Source: Company data, Bloomberg, HSBC estimates, Note:* inclusive of 4% additional stake from minorities
22
500
2,525
n/a
1,019
94
98
n/a
n/a
1.6
1.8
n/a
4.2
0.9
1.5
n/a
n/a
13.5
11.0
n/a
28.1
6.3
10.0
n/a
n/a
488
2.0
14.4
356
1.0
8.3
160
8.6
43.1
1,080
5.8
29.0
Organic through new banking license
Organic through new banking license
abc
Commercial Banks
MENA and Turkey
17 July 2013
Turkish Banks – interest
rate rally mostly priced in
 We see the recent sell-off – led by a very sharp rally in interest
rates – as a good long-term buying opportunity, despite potential
headwinds in the short term
 We have lowered our 2013 net income estimate by 10% for the
Turkish banks we cover, but keep our 2014 estimate almost intact;
despite lower estimates the Turkish banks are now trading at
undemanding 2013e/2014e PEs of 8.1x/7.1x
 We have lowered our TPs on average by 26% on higher CoE and
lower earnings estimates; maintain OW ratings for Ak, Garanti, Is
and Halk, and upgrade Vakif and Yapi to OW from N
Blame it on the interest rates
Throughout their history, Turkish banks have
always been the most sensitive interest rate plays,
not only among Turkish equities but also among
CEEMEA equities as a whole. In addition to the
general negatives of higher rates on banks (ie.
slower volume growth, lower affordability
(resulting in deterioration in asset quality) and
higher CoE), the maturity mismatch on the
Turkish banks’ balance sheets make them more
vulnerable in periods of rising interest rate, as it
results in a sharper contraction in their margins.
The sharp rate rally is yet to take its
toll on profits…
The Turkish fixed income market has seen one of
the biggest rate swings in its history during the
last few months. From 4.6% levels back in May,
Turkish 2-yr benchmark bond yields rose to 9.5%
levels in July. This move in rates will impact
Turkish banks’ financials partially in Q2 2013
(only June numbers will be affected) and much
more significantly in H2 2013.
…but the stocks have already almost
fully reflected the move…
Equity markets have always been quite efficient
and rapid in adjusting to the new normal. From its
peak on 15 May, the Turkish banking sector index
(BIST-Banks) is down by 37% in USD terms and
has underperformed the MSCI-EM banks index
by 26%. Since the beginning of the year, the
BIST-Banks index is down 25% in USD terms
and has underperformed the MSCI-EM banks
index by 16%. This is not surprising given the
23
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Commercial Banks
MENA and Turkey
17 July 2013
A very sharp swing in TRY interest rates
12.0%
Turkish banks have underperformed MSCI-EM banks
Jul/13
May/13
Mar/13
Jan/13
Nov/12
Sep/12
Jan/12
Jun/13
Apr/13
Feb/13
Dec/12
Oct/12
Aug/12
Jun/12
Apr/12
Feb/12
Dec/11
4.0%
Jul/12
6.0%
May/12
8.0%
Mar/12
2.20
2.00
1.80
1.60
1.40
1.20
1.00
0.80
10.0%
MSCIEM BANKS (USD)
XBANK (USD)
XBANK vs. MSCI EM BANKS (USD)
2-yr benchmark
10-yr benchmark
5-yr cross currency rate
Source: Bloomberg
Source: Bloomberg
2014. For 2013, Vakif and Yapi’s earnings
estimates are down by 4.0% and 3.6%,
respectively, from their peaks, while for 2014,
their estimates are down by 5.0% and 5.8%,
respectively.
inverse relationship between the BIST-Banks
index and the two-year benchmark interest rates.
Indeed, the chart below would appear to indicate
that the recent interest rally has already been fully
priced into the Turkish banking sector.
However, we believe these downward revisions in
earnings only reflect the potential impact of the
interest rate ceiling introduced on highly
profitable overdraft loans, and not the impact of
the rising interest rates on growth, margins, and
asset quality. Hence, although we see the bank
stocks as already undervalued, we expect further
falls in consensus earnings estimates to act as a
constraint on their performance in the short term.
…despite consensus earnings
estimates having further to fall
Banking sector consensus earnings estimates for
2013 and 2014 peaked in late May. Since then,
2013 and 2014 earnings estimates for the largecap banks have fallen 2% and 3%, respectively.
Among the large-cap banks, Vakifbank and Yapi
Kredi have seen the greatest downward earnings
revisions from their peaks, for both 2013 and
The BIST-banks benchmark index reflects the moves in the TRY rates – the rate rally has almost fully been priced in so far
120,000
1.40
110,000
1.30
1.20
100,000
1.10
90,000
1.00
80,000
0.90
70,000
60,000
01/Jan
0.80
0.70
16/Jan
31/Jan
15/Feb
02/Mar
XBANK (USD) (LHS)
Source: Bloomberg
24
17/Mar
01/Apr
16/Apr
01/May
16/May
31/May
15/Jun
2-yr benchmark rate (indexed at 1.0 and inverted - RHS)
30/Jun
abc
Commercial Banks
MENA and Turkey
17 July 2013
Question to be answered:
where will interest rates
settle?
Our interest rate view
By MelisMetiner, HSBC Turkey Economist
The Fed’s guidance for QE tapering has taken a
toll on risk appetite and put pressure on emerging
market assets over the past month. As a result, the
Turkish lira has depreciated by 4.3% against the
EUR-USD basket since the end of May. Since
mid-June, the CBRT has been responding to the
currency weakness by squeezing lira liquidity and
selling FX reserves. Since 11 June, the bank has
sold USD6.3bn in an attempt to provide some
support for the currency. In our recent note, TRY:
In the CBRT we trust, 26 June 2013, we estimated
that the bank can comfortably sell USD10-13bn of
reserves. But if this is not enough to release the
pressure on the Turkish lira, and risk aversion and
capital outflows persist, the CBRT may be forced
to raise rates. In this scenario, we would expect
hikes only in the overnight lending rate. We
believe that the CBRT would prefer to keep the
policy rate unchanged at 4.5% for as long as
possible. This way, if and when volatility
subsides, the bank can resume funding the market
at this relatively lower rate. And because the
overnight borrowing rate cannot be above the
policy rate, there is little room for hikes there.
Hiking only the overnight lending rate instead of
raising both would widen the rate corridor,
increasing volatility and reducing the volatilityadjusted return for portfolio investors. But this
concern will most likely be outweighed by
domestic growth concerns. The recovery has not
gained pace yet, and the CBRT will look to
provide a boost to growth as soon as the external
environment allows.
Changes in key forecasts:
volume, NIM and asset quality
In this note, our key fundamental changes are to
volumes, margins, and asset quality.
Loan growth: faster-than-expected
growth in H1 and a slowdown in H2
The banking sector’s Q2 loan and deposit growth
has been faster than our previous forecasts.
According to the BRSA daily bulletin, Turkish
banking sector loan volume grew by 10.5% in Q2
compared to end-March, and by 15.7% in H1
2013 vs.YE 2012. However, please note that the
volume growth is inflated due to the depreciation
in the currency. Adjusted for the currency, loan
growth was around 13.5% in H1 2013. In Q2,
loan growth in non-retail TRY loans (+9.6%) and
mortgage loans (+9.0%) led the loan growth. FX
loans grew by 7.6% in USD terms, but were up
14.7% in TRY terms.
Although we have lowered our volume growth
forecasts for H2 2013 by around 2-3pps for
different segments, our total loan growth forecast
for 2013 is 21% y-o-y versus 18% y-o-y
previously, owing to strong volume growth in Q2
and an assumption of a weaker currency.
25
abc
Commercial Banks
MENA and Turkey
17 July 2013
TRY
13%
13%
11%
13%
13%
13%
14%
11%
14.2%
2.0%
5%
2011
2012 2013e 2014e
FX in USD terms
-5%
-3%
2010
2008
Total loans
2009
TRY
2010
2011
2012 2013e 2014e
FX in USD terms
Total deposits
Source: BRSA, HSBC estimates
Deposit growth: de-dollarization
The weakness in TRY resulted in de-dollarisation
of deposits in the system in Q2. FX deposits were
down by 0.8% in USD terms in Q2 while TRY
deposits increased by 5.3%. According to the
BRSA daily bulletin, deposit growth was 5% in
Q2 2013 and 9% in H1 2013, both of which are
inflated by the weaker currency. We expect dedollarisation in the deposit base to continue in H2
2013. While we are increasing our deposit growth
forecast to 13% for 2013, versus 11% previously,
the change mainly stems from a weaker TRY
assumption. We now look for 14% TRY deposit,
and 2% FX deposit, growth in 2013 y-o-y.
Change in NIM forecast: the driver of
earnings estimate changes
Rising interest rates have led us to revise our
interest rate assumptions for all asset and liability
classes. The key determinants of Turkish banks’
NIMs have always been TRY loan and TRY time
deposit rates, as the former make up 46% of total
interest earning assets (IEA) and the latter make
up 41% of total interest bearing liabilities (IBL) at
the sector level.
On our previous assumptions, we were looking
for a declining trend in loan rates and for time
deposit rates to stabilise at around the 6.5% level.
We now assume a rise in TRY time deposit rates
to 8% and we assume loan rates will bottom-out
2013 quarterly TRY loan, time deposit and loan/time deposit spread assumptions
12.0%
11.0%
10.0%
9.0%
8.0%
7.0%
6.0%
5.0%
4.0%
3.0%
2.0%
Q1
Q2
26
20%
2%
10%
0%
Source: BRSA, HSBC estimates
Source: HSBC forecasts
27%
15%
6%
5%
20%
10%
13%
14%
7%
2009
16%
11%
16%
22%
9%
21%
21%
9%
16%
25%
1%
2008
27%
30%
30%
28%
HSBC’s deposit growth forecasts (y-o-y)
21%
29%
10%
21%
17%
40%
35%
30%
25%
20%
15%
10%
5%
0%
33%
31%
34%
26%
HSBC’s loan growth forecasts (y-o-y)
Q3
Q4
TRY loan yield - new
TRY loan yield - old
TRY time deposit cost - new
TRY time deposit cost - old
Spread -new
Spread -old
abc
Commercial Banks
MENA and Turkey
17 July 2013
in Q3. These changes result in around a 100bps
decline in the TRY loan-to-time deposit spread in
H1 2013, compared to our previous estimates.
Differentiating between the banks: Vakifbank
vulnerable, Halkbank relatively immune
As a rule of thumb, the banks which benefited the
most from declining interest rates, in terms of
margins, will be suffering the most from the rising
rates ie Vakifbank in particular.
In addition, we’ve increased our wholesale
borrowing cost assumptions for the Turkish banks
(both for repo and for longer-term borrowing) and
have revised up our TRY marketable securities
yield assumptions for the upcoming quarters.
Fundamentally, the banks with a higher share of
fixed-rate TRY assets (loans and securities), and a
low level of hedging against their long-term loans,
will be suffering the most. The chart below shows
the ratios of fixed-rate assets to IEA for the large
banks under our coverage. As can be seen, the
balance sheet positions of Halkbank, Akbank and,
Yapi Kredi are more favourable than those of the
others in rising interest rate environments.
Vakifbank, in contrast, is the most vulnerable.
NIM forecasts for the banks under our coverage
4.2%
4.06%
4.0%
4.06%
3.94%
3.81%
3.8%
3.76%
3.6%
3.4%
3.2%
3.0%
2012
NIM new
2013e
In addition, the BRSA regulation introduced back
in May, which puts an interest rate ceiling on
overdraft loans, will also have a negative impact
on bank margins. The banks that are most
vulnerable to this change Vakifbank (1.2%
overdraft / assets ratio) and Yapi Kredi Bank (0.8%
overdraft / assets ratio). For the large-cap banks
under our coverage, we see the impact of the
introduction of this cap, ceteris paribus, as 8bps on
2013e NIM.
2014e
NIM old
All in all, such changes lead to a 12bps lower
NIM estimate for 2013, but a 5bps higher NIM
estimate for 2014, compared to our previous
estimates. We now look for an11bps and a 13bps
y-o-y fall in NIM, on average, for the large-cap
banks under our coverage in 2013 and 2014, to
3.9% and 3.8%, respectively.
Fixed-rate assets to IEA ratios as of Q1 2013
60%
56%
50%
50%
33%
31%
30%
27%
23%
33%
29%
43%
41%
39%
40%
34%
31%
29%
20%
10%
7%
5%
3%
7%
10%
7%
5%
0%
HALKB
AKBNK
Fixed rate TRY loans / IEA
YKBNK
Average
Fixed rate TRY securities / IEA
GARAN
ISCTR
VAKBN
Fixed rate TRY loans and TRY securities / IEA
27
abc
Commercial Banks
MENA and Turkey
17 July 2013
1.9%
1.2%
1.3%
0.8%
1.1%
0.7%
1.0%
0.6%
1.0%
0.6%
0.9%
0.5%
4.20%
4.00%
3.80%
1bps
0bps
3.90%
3.94%
-8bps
3.83% 3.85%
-12bps
-17bps
VAKBN
YKBNK
5bps
-20bps
-42%
-40%
-38%
-36%
-32%
-30%
-34%
HALKB
0bps
-15bps
-25bps
2013e forecast change
Stock performance since mid-May (x-axis) versus our NIM
forecast changes for 2013e
-10bps
-20bps
-23bps
2013e NIM
In our NIM analysis – comparing banks’ fixed
rate assets and overdraft exposures – Halkbank
and Akbank score the best, while Vakifbank
scores the worst.
-5bps
-15bps
-18bps
3.20%
of total assets
-5bps
-10bps
-8bps 3.70%
3.60%
Large-banks
GARAN
ISCTR
HALKB
of total loans
GARAN
increased our NPL ratio expansion and net cost of
risk forecasts for the banks under our coverage.
Changes in asset quality assumptions*
1.0%
0.9%
0.8%
0.7%
0.6%
0.5%
0.4%
0.3%
0.2%
0.1%
0.0%
0.94%
0.78%
2012
AKBNK
ISCTR
YKBNK
-25bps
Real CoR new
0.81%
0.71%
2013e
Real CoR old
0.67%
2014e
Source: HSBC estimates Note *real CoR: net NPL originations over average loans
VAKBN
Source: HSBC estimates, Thomson Reuters Datastream
All in all, we have kept our NIM forecast almost
unchanged for Halkbank (although we still foresee a
40bps fall y-o-y) while, at the other extreme, cutting
Vakifbank’s NIM forecast by 23bps (though still
looking for only a 5bps y-o-y drop in NIM in 2013,
thanks to a strong NIM expected in H1 2013).
Asset quality to deteriorate with rising
rates
We believe the global uncertainty regarding the
rates outlook, together with the recent sharp rise
in interest rates, increases the risks to the asset
quality for the Turkish banks. Therefore, we have
28
2013 NIM forecasts and forecast changes for large-cap
Turkish banks under our coverage
4.40% 4.34%
4.23% 5bps
3.40%
AKBNK
2.0%
1.8%
1.6%
1.4%
1.2%
1.0%
0.8%
0.6%
0.4%
0.2%
0.0%
0.8%
0.5%
Overdraft loans to loans and to assets (Q1 2013)
We now look for a rise of 21bps y-o-y in the NPL
ratio (41bps adjusted for write-offs) for 2013,
followed by a 14bps rise in 2014 (33bps adjusted
for write-offs). Those forecasts are 14bps and
10bps higher, respectively, (on a write-off adjusted
basis) compared to our previous estimates.
These figures imply a real cost of risk (net of NPL
originations / average loans) of 94bps in 2013e and
83bps in 2014e, versus our previous estimates of
71bps and 67bps, respectively.
abc
Commercial Banks
MENA and Turkey
17 July 2013
Net income forecasts for the large-cap banks under coverage versus consensus and our old estimates
TRYbn
__________ New* __________
2013e
2014e
Akbank
Garanti
Halkbank
Isbank
Vakifbank
Yapi Kredi
Large banks
3.02
3.27
2.65
3.07
1.43
2.03
15.5
3.56
3.80
2.87
3.43
1.63
2.51
17.8
_______ New vs. Old _______
2013e
2014e
-9%
-8%
-2%
-14%
-19%
-11%
-10%
___ HSBC vs. Consensus ___
2013e
2014e
-3%
-2%
4%
-3%
-10%
0%
-2%
-8%
-9%
-2%
-6%
-14%
-13%
-8%
1%
1%
3%
2%
-7%
-4%
0%
Source: HSBC estimates Note: *reported earnings
0.5%
0.6%
0.7%
0.4%
0.8%
0.7%
0.9%
0.8%
0.7%
0.6%
0.9%
0.7%
0.8%
0.9%
0.8%
1.4%
1.2%
1.2%
1.0%
1.3%
1.0%
Our new real CoR assumptions for the large-cap banks
under our coverage
1.6%
1.4%
1.2%
1.0%
0.8%
0.6%
0.4%
0.2%
0.0%
2012
2013e
a lower NIM and a higher CoR – have resulted in
a 10% downward revision to our 2013 net income
estimate in aggregate terms for the banks under
our coverage. The change in NIM estimates
explains 4.4pps, and the change in CoR
assumptions explains 4.9pps, of the drop. We now
look for only a 1% rise in net income the 2013.
For 2014, we have lowered our net income
estimate by 2% in aggregate terms, mainly owing
to a more conservative asset quality assumption
set. We now look for 15% y-o-y earnings growth
in 2014.
2014e
All in all, we have increased our specific
provisioning estimates for the large-cap banks
under our coverage by 31% for 2013 and by 23%
for 2014. We now look for an 80% y-o-y rise in
specific provisioning expenses in 2013 and almost
flat specific provisioning expenses y-o-y in 2014.
Compared to consensus, in aggregate terms our
2013 net income estimate is now 8% lower, while
our 2014 estimate is in line with consensus.
Changes in valuations
Summary forecast changes
Sharp rise in long-term interest rates
drives downward revisions to TPs
These key changes to our forecast – faster loan
growth (inflated by a weaker currency) in 2013e,
Since our last report on Turkish banks, Turkey
remains in the spotlight, May 2013, the
Aggregate summary financials for the large-cap banks
______New forecasts (TRYm) _____ __________y-o-y growth ___________
2012
2013e
2014e
2012
2013e
2014e
__ new versus old ____
2013e
2014e
NII
Total revenues
Total provisions
Operating expenses
Net income
29,647
42,921
5,060
17,835
15,299
32,780
47,152
6,958
20,106
15,471
35,923
51,501
7,022
22,142
17,798
30%
26%
141%
15%
15%
11%
10%
38%
13%
1%
10%
9%
1%
10%
15%
-3%
-2%
22%
0%
-10%
2%
1%
14%
0%
-2%
NIM
NPL ratio
CoR (net LLP/average loans)
ROAE
4.06%
2.5%
0.54%
16.3%
3.94%
2.7%
0.82%
14.0%
3.81%
2.8%
0.71%
14.6%
47bps
1bps
65bps
-24bps
-11bps
21bps
28bps
-231bps
-13bps
14bps
-11bps
62bps
-12bps
12bps
19bps
-115bps
5bps
21bps
12bps
43bps
Source: HSBC estimates Note: *reported earnings
29
abc
Commercial Banks
MENA and Turkey
17 July 2013
benchmark 10-yr Turkish bond yield that we use
to set our RfR has increased from 6.1% levels, by
more than 330bps, to 9.4%.
10-year TRY benchmark rate (compounded yield) vs. our old
and new RfR assumptions
10.0%
8.0%
6.0%
4.0%
01-Mar-13
01-Apr-13
01-May-13
01-Jun-13
01-Jul-13
10--yr benchmark bond compound yield
Old RfR
New RfR
Source: Thomson Reuters Datastream
Increasing our RfR to 7% from 5.5% ie still expecting a long-term decline
in rates
In this report, to reflect the impact of the change
in long-term interest rates on CoE, we have
revised our RfR assumption, increasing it to 7.0%
from the previous 5.5%. Recall that our 5.5% RfR
effectively built in an expectation for a decline in
long-term rates and we maintain a similar
expectation by increasing our RfR to only 7.0%
compared to the much higher long-term interest
rates currently.
The market is currently valuing
Turkish banks using a 15% CoE
Our new residual income discount methodologydriven target prices for the Turkish banks
incorporate CoEs of 13.1-13.3% (depending on
the beta) and point to an average 37% potential
return for the banks under our coverage. Since a
c100bps change in CoE leads to roughly a 10%
change in our target prices we calculate that the
market is pricing in around a 200bps higher CoE
for Turkish banks ie around 15%. This fits well
with a current c9.0% RfR, 5.5% ERP and betas of
around 1.1x.
30
Short-term headwinds are there but
long-term story intact
Although the recent rise in interest rates will have
a negative impact on H2 2013 and early 2014
earnings of the Turkish banks, we still believe that
the Turkish banks can sustainably continue to
generate ROAEs of around 15%.
On the negative side, the earnings outlook will
not be supportive for the latter part of the year,
and we will continue to see downward revisions
to 2013 consensus earnings for the Turkish banks.
Yet on the positive side, we believe that the rise in
long-term benchmark bond yields has already
been (almost) fully priced into the stocks.
As a cross-check, a sustainable ROAE of 15%,
with a CoE of 12.5% (and a long-term growth rate
of 5%) incorporated into a warranted-equity
methodology, points to a fair 12-month forward
P-BV multiple of 1.5x, versus the current 2013e
P-BV of 1.15x.
The recent sell-off has resulted in
very attractive entry levels
Overall, we have lowered our target prices for the
Turkish banks on average by 26%, partially due to
our lower earnings estimates but mainly due to our
higher CoE. However, having lost 37% in USD
terms since their May peaks, and having
underperformed the MSCI-EM banks index by
26%, Turkish banks still offer a 37% average
potential return based on our target prices. Potential
return equals the percentage difference between the
current share price and the target price, including
the forecast dividend yield when indicated.
abc
Commercial Banks
MENA and Turkey
17 July 2013
Summary valuation table
Name
Akbank
Garanti
Halkbank
Isbank
Vakifbank
YKB
Large Banks
RIC
Price
(TRY)
AKBNK.IS
GARAN.IS
HALKB.IS
ISCTR.IS
VAKBN.IS
YKBNK.IS
6.88
7.14
14.50
4.98
4.06
4.07
Target Potential
(TRY) Return*
9.30
10.00
23.00
6.20
5.30
5.40
35%
40%
59%
24%
31%
33%
37%
Rating Prev. TP Previous
(TRY) Rating
OW
OW
OW
OW
OW
OW
12.70
13.00
28.50
9.20
8.00
7.00
OW
OW
OW
OW
N
N
__________ PE ___________ _________ P/BV __________
2012
2013e
2014e
2012
2013e
2014e
ROAE
2013e
9.6
9.9
6.6
6.8
7.0
9.1
8.8
8.9
6.7
6.8
7.1
8.5
7.8
8.0
6.3
6.5
6.2
7.1
1.26
1.41
1.47
0.99
0.85
1.05
1.19
1.32
1.28
0.95
0.80
0.99
1.06
1.16
1.10
0.84
0.71
0.88
13.4%
14.8%
20.0%
13.3%
11.6%
11.6%
8.2
7.8
7.0
1.18
1.10
0.97
14.0%
Source: HSBC estimates, Thomson Reuters Note: *Potential return equals the percentage difference between the current share price and the target price
We rate all Turkish banks OW: our
top pick remains Halkbank
In terms of our target prices, we have made the
greatest downward revisions for Vakifbank (34%, due to the negative NIM outlook), and
Isbank (-33%, due to the negative impact of the
participation portfolio re-valuation).
Despite these downward revisions to our target
prices, we now rate all large-cap Turkish banks
Overweight, since none of the banks have a
potential return below 17.5%. In this report we
upgrade Yapi Kredi and Vakifbank to Overweight
from Neutral and maintain Akbank, Garanti,
Halkbank and Isbank at Overweight.
Halkbank, a GEMs Super 15 portfolio constituent
(trading at a 2013e PE of 6.9x and P-BV of 1.3x)
is our top-pick with a 59% potential return. We
then favour Garanti and Akbank, with potential
returns of 40% and 35%, respectively
31
abc
Commercial Banks
MENA and Turkey
17 July 2013
Shareholding structures of Turkish banks (USDm) (2012 data)
Bank Name
Assets
Equity Net Profit
Loans Main shareholder
Large banks
Is Bankasi
Garanti Bankasi
97,469
88,996
12,622
11,838
1,839
1,706
Akbank
Ziraat Bankasi
Yapi Kredi Bankası
Halk Bankasi
Vakıflar Bankası
Denizbank
Finans Bank
Ekonomi Bankasi
86,585
85,617
67,878
60,156
58,100
31,386
26,931
25,479
12,174
8,028
9,368
6,846
6,621
3,147
3,633
2,778
1,639
1,413
1,063
1,442
811
400
524
265
59,523 Isbank Mensuplari
51,014 Banco Bilbao Vizcaya
Dogus holding
48,698 Sabanci Holdings
38,653 Govt of Turkey
42,094 KOC Financial Services
36,608 Basbakalink
37,852 Govt of Turkey
20,080 Sber bank
18,251 National Bank of Greece
17,468 TEB Mali Yatirimlar
11,552
10,415
9,745
8,452
6,589
6,495
6,032
4,385
4,294
4,146
2,586
2,092
1,956
1,920
1,907
1,564
1,527
1,453
1,416
1,187
1,023
970
906
639
468
383
260
178
10
1,304
937
1,211
1,041
4,926
668
1,066
334
581
551
392
312
232
298
170
308
229
261
199
242
266
62
98
60
88
143
41
98
7
117
140
170
139
202
110
176
45
121
67
17
16
46
11
34
25
33
59
15
22
13
21
18
8
1
30
8
4
(3)
Domicile Stake
ROA
ROE
Turkey 41% 1.9% 14.6%
Spain 25% 1.9% 14.4%
Turkey 20%
Turkey 49% 1.9% 13.5%
Turkey 100% 1.7% 17.6%
Turkey 82% 1.6% 11.3%
Turkey 51% 2.4% 21.1%
Turkey 59% 1.4% 12.3%
Russia 100% 1.3% 12.7%
Greece 58% 1.9% 14.4%
Turkey 42% 1.0% 9.5%
Small- and medium-sized banks
Bank Asya
Kuveyt Turk
Turkiye Finans
Sekerbank
Iller Bankası A
Albaraka Turk
Sınai Kalkinma Bankası
Alternatif Bank
Anadolubank
Citibank
Burgan Tekfen
GSD Yatirim Bankası
Aktif Yatirim Bankası
Tekstil Bankasi
IMKB Takas Saklama
Türkiye Kalkinma
Arap Türk Bankasi
Deutsche Bank
Turkland Bank
The Royal Bank of Scotland N.V.
BankPozitif Kredi ve Kalkınma
Merrill Lynch Yatırım Bank
Bank Mellat
Société Générale
Turkish Bank
JPMorgan Chase Bank
Nurol Yatirim Bankası
Portigon
Taib Yatirim Bank
Source: companies
32
8,811
6,509
7,213
5,762
4,393
4,888
3,794
2,858
2,735
1,626
1,543
1,399
1,315
1,426
101
1,211
409
283
1,009
200
727
12
116
229
171
n/a
17
-
Ortadogu Tekstil
KFH
National Commercial Bk
Bank Turanalem
n/a
AlBaraka Group
Is Bankasi
CBQ
Gazlar Istihsal Endustri
Citibank Overseas
Burgan Bank
GSD Holdings
Calik Holdings
GSD Holding
Istanbul stock exchange
Bank Med, SAL
Libyan Foreign Bank
Deutsche Bank AG
BankMed SAL
RBS
Bank Hapoalim
Merrill Lynch
Adalet Hisseleri
Société Générale
Ozyol Holding
JPMorgan Chase & Co.
Nurol Holdings
Portigon AG
Taib Bank
Turkey
Kuwait
Saudi Arabia
Kazakhastan
n/a
Bahrain
Turkey
Qatar
Turkey
US
Kuwait
Turkey
Turkey
Turkey
Turkey
Lebanon
Libya
Germany
Lebanon
Great Britain
Israel
US
Iran
France
Turkey
US
Turkey
Germany
Bahrain
5% 1.0%
62% 1.3%
65% 1.7%
34% 1.6%
n/a 3.1%
54% 1.7%
50% 2.9%
75% 1.0%
70% 2.8%
100% 1.6%
100% 0.7%
100% 0.8%
99% 2.3%
76% 0.6%
33% 1.8%
50% 1.6%
62% 2.1%
100% 4.1%
50% 1.0%
100% 1.9%
70% 1.3%
100% 2.2%
30% 2.0%
100% 1.2%
55% 0.1%
100% 7.7%
78% 3.0%
100% 2.5%
100% -32.0%
9.0%
14.9%
14.0%
13.3%
4.1%
16.5%
16.5%
13.5%
20.8%
12.2%
4.5%
5.2%
19.7%
3.8%
19.7%
8.0%
14.2%
22.7%
7.3%
9.2%
5.0%
34.0%
18.7%
12.8%
0.8%
20.7%
19.0%
4.5%
-49.5%
abc
Source: Company Data & HSBC Estimates
Asset growth (2012-14e CAGR)
PAT growth (2012-14e CAGR)
18%
25%
15%
20%
12%
UAE
Lebanon
Qatar
Kuwait
0%
Saudi
0%
Egypt
5%
Turkey
5%
UAE
10%
Kuwait
10%
Oman
15%
Egypt
15%
Saudi
20%
Lebanon
20%
Turkey
Deposit growth (2012-14e CAGR)
Qatar
Credit growth (2012-14e CAGR)
Oman
Commercial Banks
MENA and Turkey
17 July 2013
15%
9%
Net interest income growth (2012-14e CAGR)
15%
15%
Lebanon
Operating income growth (2012-14e CAGR)
UAE
Oman
Lebanon
UAE
Saudi
Turkey
Qat ar
Kuwait
UAE
Lebanon
Kuwait
Saudi
Oman
0%
Turkey
0%
Egypt
5%
Qatar
3%
Egypt
10%
6%
12%
10%
9%
5%
6%
0%
3%
Saudi
Oman
Egypt
Turkey
Kuwait
Qatar
Lebanon
UAE
Kuwait
Turkey
Saudi
Oman
Egypt
0%
Qatar
-5%
33
34
Source: HSBC estimate
UAE
0.0%
26%
45%
45%
41%
34%
UAE
Lebanon
Kuwait
1%
8%
14%
21%
Lebanon
Kuwait
UAE
Oman
KSA
Qatar
Egypt
Turkey
7
7
KSA
Lebanon
Kuwait
UAE
Oman
9
8
8
10
10
13
15
Lebanon
Kuwait
30%
UAE
40%
KSA
0.0%
x
30%
60%
Oman
50%
43%
)
38%
Other Inc. / Avg.
9
Qatar
0.9%
8%
Asset / Equity
12
Egypt
0.6%
0.4%
KSA
Oman
Qatar
Egypt
Turkey
0%
Turkey
Lebanon
0.4%
UAE
1.2%
Kuwait
0.8%
0.4%
+
0.3%
0%
KSA
14%
Oman
7%
1%
21%
Qatar
0.0%
x
0.3%
35%
27%
28%
21%
)
Egypt
x
Qatar
Fee Inc. / Avg. Assets
Turkey
+
0.7%
Provisions / Avg. Assets
0.5%
14%
14%
16%
12%
13%
14%
19%
15%
20%
Egypt
0.64%
1.1%
1.5%
1.8%
1.5%
1.9%
2.3%
2.1%
1.8%
ROE
Turkey
0.94%
0.68%
0.38%
0.45%
0.34%
0.21%
0.3%
Lebanon
Kuwait
UAE
Oman
KSA
Qatar
0.58%
0%
0.5%
0.7%
0.6%
1.0%
Egypt
Lebanon
Kuwait
UAE
Oman
KSA
Qatar
Egypt
Turkey
ROA
Lebanon
0.8%
Kuwait
1.6%
0.8%
+
KSA
0%
0.6%
Oman
6%
Turkey
0%
0.5%
2%
1.2%
0.9%
1.0%
1.7%
2.4%
1.2%
Qatar
2%
Lebanon
Kuwait
2.7%
2.2%
-
Egypt
NIM*
2.0%
2.6%
UAE
Oman
2.5%
2.5%
Operating ROA
Turkey
2.8%
2.7%
KSA
Qatar
3.5%
1%
Lebanon
Kuwait
UAE
Oman
2.6%
(
KSA
2.7%
3%
Qatar
4%
3.3%
(
Egypt
Turkey
5%
4.1%
2%
3.9%
3%
Egypt
Turkey
Commercial Banks
MENA and Turkey
17 July 2013
abc
2013e ROE decomposition: Overall Turkish ROEs are in line with GCC while Egypt should deliver better ROEs
30%
10%
6
3
0
1 - Tax Rate
1 - (Cost/Income)
20%
10%
0%
Commercial Banks
MENA and Turkey
17 July 2013
abc
MENA Banks
35
abc
Commercial Banks
MENA and Turkey
17 July 2013
Abu Dhabi Commercial
Bank
 We estimate ADCB has USD4,069m in excess capital which the
bank can leverage for international growth
 99% of earnings come from domestic operations in the UAE,
hence international diversification of earnings could be welcome
 We increase our TP to AED5.4 from AED5.0 on positive earnings
revisions but downgrade the stock to Neutral from OW on
valuation
Surplus capital
International operations
We estimate ADCB has USD4,069m in excess
capital which is sufficient to allow the bank to make
an associate investment in a large listed Turkish
bank (up to a 25% stake). ADCB would also be
capable of buying a mid-tier bank in Egypt.
We estimate ADCB currently earns 99% of its
revenue from the UAE and therefore some
international diversification of earnings could be
welcome.
Our analysis indicates that purchase of an
associate stake in Turkey could enhance ADCB's
2014e ROE by 7 percentage points, and EPS
growth by 3.5ppts. The impact on earnings growth
is greater, however, in the event of a majority
acquisition in Egypt (7ppts) given full
consolidation of earnings.
We downgrade ADCB to Neutral from
Overweight on valuation. We view ADCB as a
stock with adequate capital generation and room
to distribute surplus capital further through
dividends or share buybacks. Conservative
provisioning since 2008 has improved coverage of
NPLs and loans-overdue-more-than-90-days-but
not-impaired from 68% in 2009 to 93% in 2012.
Based on current capital consumption rates, a
payout ratio of 56%, and ROE of 13% we
calculate that the bank can comfortably maintain a
Tier 1 ratio of 17% over the next 2 years. Our
base-case forecast currently assumes an increase
in the payout ratio to 60% in 2015. We assume no
capital spending on acquisitions.
36
Investment case
Revisions to earnings and target price
Our earnings revisions for 2013 and 2014 are less
than 5%.
abc
Commercial Banks
MENA and Turkey
17 July 2013
ADCB: summary of earnings revisions
(AEDm)
______ 2013e _______ ______ 2014e _______
New
Old Chg. New
Old Chg.
(%)
(%)
Net Int. Income
5,124 5,262
Non Int. Income 1,622 1,423
Total Income
6,746 6,685
Operating costs (2,067) (2,067)
Pre provn. Inc.
4,679 4,618
Bad asset chg. (1,625) (1,625)
Pre tax income
3,036 2,975
Net Income
2,705 2,646
(3) 5,124 5,309
14 1,543 1,451
1 6,667 6,760
0 (2,085) (2,085)
1 4,582 4,675
0 (1,536) (1,536)
2 3,035 3,128
2 2,697 2,787
(3)
6
(1)
0
(2)
0
(3)
(3)
We raise our target price to AED5.4 from AED5
as we reduce our long-term funding cost
assumptions by 15bp on account of the improved
liquidity at ADCB.
37
abc
Commercial Banks
MENA and Turkey
17 July 2013
Alinma Bank
 We estimate Alinma has USD2,195m in excess capital, giving the
bank scope to grow its balance sheet
 Purchase of an associate stake in an Egyptian bank would be an
alternative way to put the surplus capital to work
 The over-capitalised balance sheet remains the main hurdle to
ROE improvement. We rate the stock Neutral, TP SAR15.6
Surplus capital
Investment case
Based on our base case forecast – a 23% CAGR
2012-2015e in RWA (excluding acquisitions) –
Alinma Bank should remain over-capitalised even
in 2015, with a Tier 1 ratio of 20%. The
acquisition of an associate stake in a mid-tier
Egyptian bank would be an alternative way to put
Alinma's surplus capital to work. We estimate that
an associate investment in Egypt would increase
the ROE to 8.6% from 6.9% in 2014.
The investment debate on Alinma Bank centres on
its ability to balance its high capital deployment
into asset growth with the achievement of
attractive profitability ratios. As a new entrant in
the Saudi market, we estimate Alinma can
increase its assets by 34% per annum on average
in 2013 and 2014. However, the fast growth
comes at the expense of the bank's ROA. The
latest Q1 2013 earnings report indicated that ROA
declined to 1.6% in Q1 2013 from 1.7% in 2012.
We forecast ROA to fall to 1.4% by 2014.
The extent of Alinma's surplus capital is not
sufficient for it to acquire a meaningful majority
stake in either Egypt or Turkey. Domestically,
Alinma has performed very well in last few years,
raising its market share of total assets from 1.2%
in 2008 to more than 3% in 2012.
International business
Alinma has no subsidiaries outside Saudi Arabia.
Its three subsidiaries within Saudi Arabia are:
Alinma Investment Company (100% owned), AlTanweer Real Estate Company (100% owned)
and Tokio Marine Saudi Arabia (29% owned).
The subsidies provide services including
investment management, brokerage, the
facilitation of mortgage financing, and insurance.
38
abc
Commercial Banks
MENA and Turkey
17 July 2013
Alrajhi Bank
 We estimate Alrajhi has USD3,427m in excess capital
 Alrajhi already has banking operations in Malaysia, Kuwait and
Jordan, however, collectively these operations are not profit
making
 The stock looks richly valued given the on-going pressure on its
NIM. We rate the stock Neutral, TP SAR77
Surplus capital
Alrajhi’s surplus capital of USD3,427m leaves room
for it to acquire an either an associate or a controlling
majority stake in a mid-tier bank in Egypt.
Our analysis suggests that purchase of an
associate stake could enhance Alrajhi’s 2014e
ROE by 1%. We estimate the impact on 2014e
earnings would be negligible.
We hold the view that Alrajhi would aim to first
make all its existing foreign operations profitable
before venturing out further into Egypt or Turkey.
The bank's operational history suggests that it
prefers to grow organically rather than through
acquisitions
Other subsidiaries within Saudi Arabia include the
Al Rajhi Company for Development, Al Rajhi
Capital and Al Rajhi Takaful. The domestic
subsidiaries provide financial, insurance and real
estate services.
Investment case
The investment debate on the stock centres on its
rich valuation. Alrajhi is trading at 13.4x and 3.0x
2014e EPS and BVPS, respectively, in the face of
the ongoing pressure on its NIM. We think the
NIM could decline further as retail lending
spreads adjust downwards (by another 330bp) to
the sector average level. We forecast the NIM to
trough in 2014, at 3.6%, down from 4% in 2012
and 4.6% in 2011.
Alrajhi has 6 fully owned subsidiaries, of which 3
operate outside of Saudi Arabia. These are Al Rajhi
Banking & Investment Corporation (Malaysia), Al
Rajhi Banking Investment Company (Kuwait), and
Al Rajhi Banking Investment Company (Jordan).
Alrajhi owns 100% of these subsidiaries. The
international business as a whole was loss making
and accounted for less than 1% of group net
income, per the latest available data in the 2011
annual report.
39
abc
Commercial Banks
MENA and Turkey
17 July 2013
Arab National Bank
 We estimate ANB has USD636m in excess capital, which is quite
low compared to other MENA peers we cover
 The lower surplus capital position will likely encourage ANB to
focus on domestic growth
 SAR1.3bn of loans past-due-but-not-impaired should keep cost of
risk elevated. We rate the stock Neutral, TP SAR33
Surplus capital
ANB’s limited surplus capital of USD636m
leaves little room to even acquire a meaningful
stake in a mid-tier bank in Egypt.
The share of total banking assets for ANB in KSA
was 8% as at the end of 2012, which makes it a
mid-tier bank in Saudi Arabia. We therefore think
ANB will continue its focus on domestic growth.
We estimate ANB will grow its RWA at 11% pa
annum between 2013 and 2015.
ANB has no meaningful international operations.
The bank has 2 subsidiaries within Saudi Arabia:
ANB Investment Company (fully-owned) and
Arabian Heavy Equipment Leasing Company
(62.5% owned). These provide services including
financial advice, wealth management, equity
trading and leasing of heavy equipment.
Investment case
Our target price of SAR33 incorporates the higher
normalised cost of risk in the retail and corporate
loan segments. Given the potential provision
deficit, we estimate ANB may have to increase
the cost of risk to 110bp, which is our normalised
40
estimate, from 82bp in 2012. In the corporate
segment, we envisage cost of risk increasing to
100bp from 56bp in 2012.
Downside risk to the retail lending spread, of
c150bp we estimate, coupled with the secondhighest funding cost and the high cost-asset ratio
of 1.4%, are likely to put negative pressure on
ANB's pre-provision profitability in the medium
term. We expect pre-provision profitability to
trough at 2.1% in 2014, down from 2.3% in 2012.
abc
Commercial Banks
MENA and Turkey
17 July 2013
Bank Audi
 Audi has no surplus capital; the bank has only recently committed
USD300m to purchase a banking license in Turkey
 The Turkish operations are unlikely to enjoy returns above the
cost of equity in the near term given the high start-up costs
 We reduce our TP to USD6.8 from USD7.2 and retain our Neutral
rating
Surplus capital
According to our calculations, Bank Audi has no
surplus capital to invest in overseas operations. One
of the reasons is Audi’s capital allocation of
USD300m to start operations in Turkey during 2012.
Net income split (2012)
Lebanon
77%
Others
13%
Audi has opted to grow organically in Turkey. It
acquired a new banking license for USD300m in H2
2012. Audi has also banking activity in Syria, Egypt
and Europe. Audi derives 23% of its net income
from international operations. Egypt is the biggest
subsidiary and contributes c10% of group net
income. Given that Turkey is a start-up operation it
is unlikely to be profitable in the near term. We think
this operation will break-even in 2013 before
becoming marginally profitable in 2014.
The bank's Syrian operation was a green-field
venture started in 2005. In Egypt it acquired a
100% stake in Cairo Far East Bank in 2006 in a
deal valued at USD94m.
Egy pt
10%
Investment case
The slowdown in investment gains and increasing
costs are the two main reasons behind the -5%
earnings decline that we forecast for 2013. Bank
Audi’s reliance on investment gains has increased
over time. Investment gains contributed to 20%
2012 of total revenue, up from 11% in 2009. We
estimate investment gains will reduce by one-third
by 2015. We estimate non-interest expenses to
increase 13% pa over 2012-14, mainly due to the
new Turkish operations. We remain Neutral on
the stock reducing our target price to USD6.8
from USD7.2.
41
abc
Commercial Banks
MENA and Turkey
17 July 2013
Key subsidiaries
USDm (2012)
Country
Stake
Assets
% group
net income
Year of
acquisition*
Implied valuation
multiples
P-NAV
Subsidiaries
Audi Syria
Audi Egypt
Odeabank
Syria
Egypt
Turkey
47%
100%
100%
Source: Company data, HSBC estimates, Note *starting year of green-field operations in Syria and Turkey
We revise up our cost estimates in both 2013 and
2014 due to the expansion in Turkish operations
which leads to a 5% reduction in net income in
both 2013 and 2014.
Changes in estimates
LBPbn
2013e
old
2013e % ch
new
2014e
old
2014e % ch
new
Net int. inc.
Non int. income
Total income
Op. costs
Core income
Impairments
PBT
Taxes
PAT
950
398
1,639
(817)
822
(109)
717
(217)
499
929 -2%
415
4%
1,645
0%
(868)
6%
776 -6%
(112)
3%
665 -7%
(192) -12%
473 -5%
1,050
345
1,706
(880)
826
(134)
696
(205)
490
1,038
392
1,755
(962)
793
(137)
657
(190)
467
42
-1%
14%
3%
9%
-4%
2%
-6%
-8%
-5%
636.0
3,425.0
2,000.0
0.0%
10.0%
-1.0%
2005
2006
2012
Organic
0.9
Organic
PE
6.3
abc
Commercial Banks
MENA and Turkey
17 July 2013
Bank Muscat
 Bank Muscat’s surplus capital of USD1.08bn is sufficient to make
an associate acquisition in Egypt
 The majority of operating income comes from Oman; the
operations in India and other MENA regions are quite small
 We retain our TP of OMR0.72 and maintain our Overweight rating
Surplus capital
Bank Muscat has a surplus capital position of
USD1.08bn following its recent capital raising
exercise. The bank raised new equity worth
OMR170m through a combination of a rights
issue and a private placement during 2012-13.
Retail lending activity is slowing down in Oman
due to stricter regulations from the central bank.
This could prompt Bank Muscat to deploy some
of its capital into overseas markets. We
highlighted in our previous section that Bank
Muscat screens well in terms of an associate
investment in Egypt.
Bank Muscat derives more than 95% of its
operating income from Oman. It also has a
presence in Saudi Arabia and Kuwait through
wholly-owned branches. However the number of
branches is very limited (Saudi: 1, Kuwait: 1)
when compared with the 136 branches in Oman.
The bank also has representative offices in Dubai
and Singapore.
Bank Muscat holds a 49% stake in BMI Bank,
Bahrain and a 46% stake in Mangal Keshav
Holdings (an Indian Financial Services provider).
Both of these are associate investments and together
contribute less than 1% of group net income.
Operating income split (2012)
International
3%
Oman
97%
Bank Muscat’s international associates
Name
Mangal Keshav (Financial
services)
BMI Bank (Banking)
Country
Stake Carrying value
(USDm)
India
46%
94
Bahrain
49%
25
Investment case
We estimate Bank Muscat will grow 2013
earnings by 10% if we exclude a non-recurring
loss of OMR15m incurred on pre-paid travel cards
in 2012. The earnings growth is primarily led by
the stable asset quality and the strong recoveries
43
abc
Commercial Banks
MENA and Turkey
17 July 2013
in retail lending. We estimate an average cost of
risk of 33p for 2013-2015, which is lower than the
historical average of 80bp. This offsets the slower
credit growth of 12% that we forecast for 2013,
down from 16% in 2012. The slowdown in Omani
lending is being led by retail loans which are
affected by the stricter regulations imposed by the
Omani central bank. We retain our target price of
OMR0.72 and maintain our Overweight rating.
Our estimate changes are marginal in both 2013
and 2014, except that we reduce impairments in
both 2013 and 2014 given the significant
improvement in loan loss recoveries.
OMRm
2013e
old
2013e % ch
new
2014e
old
2014e % ch
new
Net int. inc.
251.1 245.6 -2%
276.9 267.3 -3%
Non int. income 107.9 102.8 -5%
118.5 112.8 -5%
Total income
359.0 348.4 -3%
395.5 380.2 -4%
Op. costs
(150.3) (149.7)
0% (165.4) (163.9) -1%
Core income
208.7 198.7 -5%
230.0 216.2 -6%
Impairments
(32.5) (21.6) -34% (36.7) (24.1) -34%
PBT
176.6 177.4
0%
194.8 193.6 -1%
Taxes
(24.7) (24.8)
0% (27.3) (27.1) -1%
PAT
151.8 152.6
0%
167.5 166.5 -1%
44
abc
Commercial Banks
MENA and Turkey
17 July 2013
Banque Saudi Fransi
 We estimate BSF has USD2,014m in excess capital. However,
given the majority ownership by a foreign parent, we think BSF is
unlikely to deploy the surplus outside Saudi Arabia
 BSF also has a presence in Syria through an associate
investment and has insurance exposure within Saudi through a
joint venture with Allianz Group
 The fact that BSF has the lowest NIM and cost-asset ratio in
Saudi Arabia suggest reduced risk to pre-provision profitability.
We rate the stock Overweight, TP SAR38
Surplus capital
BSF’s surplus capital of USD2,014m would allow
the bank to acquire an associate stake in a smallto-mid-tier bank in Egypt. However, its majority
ownership by a foreign parent suggests to us that
BSF is unlikely to deploy this surplus outside of
Saudi Arabia. We estimate a RWA CAGR of 11%
for BSF over 2012-2015.
In any event, we calculate that the acquisition of
an associate stake in Egypt would increase BSF’s
2014e ROE by only 1%.
BSF's business is focused entirely domestically,
with the exception of a Syrian operation which
BSF is looking to exit (Banque BEMO Saudi
Fransi, of which BSF owns 27%).
BSF has four Saudi subsidiaries: Saudi Fransi
Capital (99% owned), Saudi Fransi Insurance
(100% owned), Saudi Fransi Financing and
Leasing (100% owned) and Sakan Real Estate
Financing (100% owned). These are engaged in
brokerage, asset management, insurance, leasing,
and real estate financing.
Investment case
BSF's fundamental advantage is the fact that it has
the lowest cost-asset and revenue-asset ratios in
Saudi Arabia, 0.9% and 3%, respectively. This
means that BSF's pre-provision profitability is
relatively safe in a sector where revenues continue
to be under pressure. We forecast BSF's preprovision profitability to be 2.1% in both 2013
and 2014.
Our target price of SAR38 reflects our estimate of
the loan loss provision deficit based on the
adjusted provision coverage ratio. For more
details on our calculation of the adjusted provision
coverage please refer to our recent report on Saudi
banks “Be selective in the current rally”,
published on 11 June 2013.
We estimate the bank has room to increase its
payout ratio to 52% from the current 27%. A
45
Commercial Banks
MENA and Turkey
17 July 2013
higher payout ratio, in our view, would be more
commensurate with the RWA growth outlook and
should release surplus capital over time. Such a
revision would raise the dividend yield to 5%
from the current 2%.
46
abc
abc
Commercial Banks
MENA and Turkey
17 July 2013
Blom Bank
 Blom has surplus capital of USD440m, but we think it is unlikely to
deploy this outside Lebanon
 Blom already has a subsidiary in Egypt, and expansion into
Turkey is unlikely, in our view
 We retain our TP of USD10.2 and maintain our Overweight rating
Surplus capital
We estimate that Blom has surplus capital of
USD440m, which is insufficient for meaningful
expansion in either Turkey or Egypt. In any case,
Blom already has a small subsidiary in Egypt and
has in the past expressed disinterest in investing
inTurkey.
Lebanon contributes more than 80% of Blom’s net
income. Egypt and Saudi contribute 7% and 4%,
respectively. Other overseas operations include
Jordan, Syria, the UAE, Qatar and Europe. The key
international subsidiaries are in Egypt and Syria. In
Egypt, Blom acquired a majority stake in Misr
Romanian Bank in 2005 in a deal worth USD98m.
The bank's Syriam operation was a green-field
venture started in 2004.
Europe
Saudi
3%
Lebanon
4%
Qatar
81%
0%
UAE
1%
Sy ria
1% Jordan Egy pt
3%
7%
Source: company data
Investment case
We think Blom's low cost-income ratio of 36% in
2012 (versus Audi's 46%) is an advantage and helps
Blom offset revenue weakness due to slower credit
growth. Blom’s 2013e capital adequacy ratio of
13.8% is also better than Audi’s 11.3%. This offers
an upside risk of higher dividend pay-outs and
potentially higher ROEs. Blom is trading at a deep
discount valuation of 0.8x 2014e P-NAV while
offering a 2014e ROE of 15%. We retain our target
price of USD10.2 and our Overweight rating.
47
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Commercial Banks
MENA and Turkey
17 July 2013
Key subsidiaries
USDm (2012)
Country
Stake
Assets
% group
Year of
net income acquisition *
Implied valuation
multiples
P-NAV
Subsidiaries
Blom Syria
Blom Egypt
Syria
Egypt
49%
99%
Source: Company data, HSBC estimates, Note: *starting year of green-field operations in Syria
48
625
1,575
1.0%
7.0%
2004
2005
Organic
1.5
PE
10.0
abc
Commercial Banks
MENA and Turkey
17 July 2013
Burgan Bank
 Burgan has surplus capital of USD615m, but has just recently
acquired a bank in Turkey
 We expect Burgan to focus on profitability improvement in Turkey,
Algeria and Jordan; growth is not a concern in these countries
 We retain our TP of KWD0.67, but downgrade the stock to Neutral
from Overweight on valuation
Surplus capital
Burgan does have surplus capital of USD615m,
but this is lower than the minimum capital we
estimate would be required to expand Egypt. In
Turkey, Burgan has recently acquired Eurobank
Tekfe for USD356m.
Burgan is one of the most regionally diversified
banks in our coverage with less than 50% of net
income coming from domestic operations.
We view Burgan’s acquisition of Eurobank
Tekfen in Turkey during 2012 as a positive. This
bank has a cost-income ratio of 80%, which is
well above the Turkish sector average. This
provides room to improve operating leverage, and
hence profitability. We estimate that Eurobank
Tekfen’s existing branch and employee base
could easily support a balance sheet 1.5-2.0x
thecurrent size. Please refer to our report titled
"Upgrade to OW: Improving profitability in
Turkey is the key catalyst” dated 3 September
2012 for more details.
The bank’s other major international operations
are in Jordan and Algeria. These banking units
were acquired as part of a KIPCO restructuring
exercise over 2008-10. KIPCO, which is the
parent company of Burgan, is a major
conglomerate in Kuwait.
In our view, Burgan will focus on profitability
improvement in its three key overseas markets –
Turkey, Jordan and Algeria – rather than further
international expansion. Balance sheet growth is
not a concern in any of these countries.
Net income split (2013e)
Kuw ait
43%
Jordan
17%
Tunisia
1%
Turkey
9% Iraq
7%
Algeria
23%
Investment case
Increasing Kuwaiti credit market share and strong
growth in Turkey should help Burgan outperform
domestic lending growth. We estimate lending
activity to increase 20% pa over 2012-15 versus
49
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Commercial Banks
MENA and Turkey
17 July 2013
Key subsidiaries
USDm
Country
Subsidiaries
Jordan Kuwait Bank
Burgan Tekfen
Algeria Gulf Bank
Bank of Bahdad
Tunis International Bank
Jordan
Turkeyt
Algeria
Iraq
Tunisia
Stake
51.1%
99.0%
91.1%
51.8%
86.7%
Assets (2012)
% group
net income
(2013e)
3,420
2,579
1,404
1,022
569
Source: company data, HSBC estimates, Note: * acquisition multiples based on stakes acquired during KIPCO restructuring
Kuwaiti credit growth of 9% pa. We estimate
ROE will improve to c24% in 2015 from c19% in
2012. However, we believe this improvement is
already factored into the stock price, which is up
51% yoy. We downgrade the stock to Neutral
without changing our target price of KWD0.67.
The changes to our net income estimates for 2013
and 2014 are marginal in nature. Although we
revise down our fees and commissions in both
2013 and 2014 this is offset by the lower costs
that we now estimate for both years.
KWDm
Net int. inc.
Fee income
Other income
Total income
Op. costs
Core income
Impairments
PBT
Taxes
PAT
50
2013e
old
2013e % ch
new
2014e
old
2014e % ch
new
164
52
52
268
(112)
156
(39)
117
(16)
90
152 -7%
42 -19%
55
6%
249 -7%
(96) -14%
153 -2%
(41)
6%
112 -5%
(17)
5%
85 -6%
186
59
63
308
(121)
186
(47)
139
(20)
107
168 -10%
47 -20%
74 18%
289 -6%
(106) -13%
183 -2%
(50)
8%
133 -5%
(21)
4%
101 -6%
17%
9%
23%
7%
1%
Year of
acquisition
2008
2012
2009
2010
2010
Implied valuation
multiples *
P-NAV
PE
3.1
1.0
2.6
1.4
1.9
54.1
8.3
9.2
16.2
26.9
abc
Commercial Banks
MENA and Turkey
17 July 2013
Credit Agricole Egypt
 Cost improvement measures should support near-term profitability
 NPL coverage is adequate to face near-term asset quality
deterioration
 We maintain our TP at EGP13.50 but upgrade to Overweight from
Neutral on valuation
Investment case
Estimate changes
Cost improvement measures to offset weaker
We have slightly revised downwards our net
interest and non-interest income estimates in line
with recent Q1 2013 results. This is offset by our
lower costs and provisioning assumptions, which
results in marginal changes to our earning
estimates for the bank during 2013-15e as
indicated in the table below:
revenue growth
CAE’s cost-asset ratio stood at 2.5% in Q1 2013
compared to the average cost-asset ratio of 1.7%
for the Egyptian banks under our coverage. We
believe CAE will thus undertake measures to
improve its cost efficiency to support its
profitability given the weak near-term revenue
growth outlook. We conservatively forecast the
bank's cost-asset ratio to average 2.4% in the next
two years, down from 2.6% in the past two years,
as the bank curbs its staff and branch network
expenditure.
NPL coverage sufficient to face near-term
asset quality deterioration
CAE's asset quality continued to remain resilient
during Q1 2013, with the NPL ratio remaining at
2%, similar to the 2012 level and up only slightly
from the 1.9% of 2011. The bank's NPL coverage
ratio also remained at a healthy level (197%),
providing a strong buffer against the further asset
quality deterioration that we expect in 2013-14. We
expect the NPL ratio to deteriorate to 2.4% and
3.2% in 2013 and 2014, respectively, while cost of
risk is expected to average 93bps in both years.
CAE: summary of earnings revisions
(EGPm)
Net Int. Income
Non Int. Income
Total Income
Op expenses
Op. Profit
Provisions
Other charges
(inc. taxes)
Net profit reported
_____ 2013e ______ ______ 2014e ______
New
Old Chg. New
Old Chg.
(%)
(%)
1,118
438
1,556
-739
817
-138
-190
1,150
465
1,616
-790
826
-142
-180
(3)
(6)
(4)
(6)
(1)
(3)
6
1,211
499
1,711
-789
922
-146
-217
1,283
534
1,816
-884
932
-150
-206
(6)
(7)
(6)
(11)
(1)
(3)
5
489
503
(3)
559
576
(3)
Source: HSBC Research estimates
Valuation
We maintain our target price at EGP13.5 but
upgrade our rating to Overweight from Neutral.
The stock is down 14% year-to-date and is
currently trading at an attractive multiple of 1.2x
P-NAV for an ROE of 20% for 2013e.
51
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Commercial Banks
MENA and Turkey
17 July 2013
Commercial International
Bank
 We estimate CIB has only cUSD300m in surplus capital.
However, we view CIB as a bank with good domestic growth
potential
 We estimate CIB can deliver a 13% yoy increase in net profit in
2013 despite the macro challenges in Egypt. CIB is less sensitive
to asset quality shocks than it was 10 years ago
 We rate the stock Overweight, TP EGP44. Our TP factors in a
gradual deterioration in asset quality as well as resilience in
revenue generation despite a period of slow economic growth.
CIB is a GEMS Super 15 Portfolio constituent
Surplus capital
CIB has one of the lowest surplus capital
positions among banks we cover in MENA.
However, as discussed earlier in this report, we
view CIB as a bank with strong domestic growth
potential. CIB has no significant fully-owned
subsidiaries abroad.
Investment case
The current 13% yield on EGP t-bills will
mitigate the negative impact of slow loan growth
on the NIM in 2013. CIB is more sensitive than
peers to returns on investment securities given its
loan-asset ratio of only 43%. We forecast the
2013 NIM to hold steady at 4.6%.
In addition, the strong debt-servicing capacity of
Egyptian corporate borrowers provides room to
maintain EGP loan spreads at 3.3-3.4% in 2013.
52
However, we factor in the negative impact of a
depreciating EGP on asset quality and forecast the
NPL ratio to increase to 4.5% in 2013 from 3.7%
in 2012. This is in line with what the bank
experienced during the 30% EGP devaluation in
2003. Bur CIB's coverage ratio is more solid now,
at 152%, than it was in 2003 (111%). High
provision coverage ratios (compared to those of
the last 10 years) imply that CIB has a good
cushion against rising NPLs in the near term. We
rate CIB Overweight, target price EGP44. The
stock is trading at 8.4/1.5 times EPS/BVPS 2014e.
abc
Commercial Banks
MENA and Turkey
17 July 2013
Commercial Bank of
Qatar
 CBQ has no surplus capital as it is acquiring a bank in Turkey
 Turkey will consume USD490m in new capital and dilute CAR by
350bp, in our estimate
 We retain our TP of QAR75 and Neutral rating
Surplus capital
We estimate that CBQ has no surplus capital
given that it is currently in the process of
acquiring a small bank in Turkey.
CBQ has agreed to acquire a 70.8% stake in
Alternatif Bank at 2.0x Q2 2013 NAV. According
to our calculations, CBQ will require USD490m
to conclude this deal. This will dilute CBQ's
capital adequacy ratio by 350bps. For more
details, please refer to our report titled "CBQ:
Deal multiple is expensive and increases capital
risks” dated 21 March 2013.
This has potential to increase over time as we
expect CBQ to devote increased attention to Turkey
going forward.
Split of net income, including Turkey (2013e)
International
13%
Qatar
82%
Turkey
5%
We estimate CBQ will derive 18% of its net
income from international operations by the end
of 2013 (including Turkey). CBQ also has
operations in the UAE and Oman where it has
associate stakes in local banks.
The bank has a 35% stake in National Bank of
Oman (which has a 14% credit market share) and
a 40% stake in United Arab Bank (UAE), which
has a 1% credit market share.
We estimate that the net income contribution from
Turkey should be 5-6% in the near term (2013-14).
Investment case
CBQ has the highest blended cost of funding in
Qatar. Its interest expenses from bond funding as
a proportion of its assets amount to 55bp (versus
the sector average of 22bp). This is because c18%
of its interest bearing liabilities consists of fixed
rate bonds. Therefore, CBQ struggles to pass rate
compression on the asset side through to the
liability side. We estimate earnings growth of
only 3% pa during 2012-15. However, a dividend
53
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Commercial Banks
MENA and Turkey
17 July 2013
Key subsidiaries and associates
USDm (2012)
Country
Stake
Assets
ROE
Year of
acquisition
Implied valuation
multiples
P-NAV
PE
Subsidiaries
Alternatif Bank*
Turkey
75.0%
4,385
15%
2013
2.0
14.4
Associates
United Arab Bank
Oman
UAE
35.0%
40.0%
6,596
4,170
14%
18%
2005
2007
2.3
4.3
19.1
26.1
Source: company data, HSBC estimates, Note: * includes 4% minority stake
yield of 8% should offer downside support to the
stock. We retain our Neutral rating and target
price of QAR75.
54
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Commercial Banks
MENA and Turkey
17 July 2013
Doha Bank
 We estimate Doha has USD850m in surplus capital and could
benefit from making an associate acquisition in Egypt
 Qatar contributes 99% of Doha’s net income, hence international
diversification could be welcome
 We retain our TP of QAR60 and maintain our Neutral rating
Surplus capital
In our estimate, Doha has USD850m in surplus
capital. We highlighted in the previous section
that an associate acquisition in Egypt could be
ROE-enhancing for Doha.
Currently Doha has no international subsidiaries
or associates. It derives 99% of its net income
from Qatari operations. The remaining 1% comes
from overseas offices and branches.
offices and branch networks. Recently it
announced the setting up of a representative office
in Australia (see table below).
Doha’s international operations – organic in nature
Country
Nature
Status
UAE
Turkey
Singapore
Germany
UK
China
Japan
South Korea
Rep Office
Rep Office
Rep Office
Rep Office
Rep Office
Rep Office
Rep Office
Rep Office
Existing
Existing
Existing
Existing
Existing
Existing
Existing
Existing
Asutalia
Hong Kong
Rep Office
Rep Office
Proposed
Proposed
Branch network
Branch network
Proposed
Proposed
India
Saudi Arabia
Investment case
Qatar
99%
International
1%
The bank currently has 42 branches in Qatar and a
branch each in UAE and Kuwait. At present,
Doha’s overseas expansion strategy is focused on
organic growth by establishing representative
We retain our target price of QAR60 and
Overweight rating. We estimate that EPS will
grow 19% in 2014 driven by strong lending
growth and stable margins. We estimate Doha
will increase lending 20% pa during 2012-15
given its recent recapitalisation.
The recent equity issuance, and improving liquidity
conditions in Qatar, should also help Doha reduce
its funding costs. Unlike the other private-sector
focused banks, it does not suffer from the drag of a
55
Commercial Banks
MENA and Turkey
17 July 2013
high bond-funding component (like CBQ) or the
fact of being an Islamic bank (like QIB). This
should protect Doha’s net interest margin. We
estimate the net interest margin will fall by only
10bp over 2012-15. Doha offers a 2013e dividend
yield of c7% which provides support for the stock.
Following the rights issue, we think Doha will
reduce its payout ratio more gradually given its
better capital adequacy position.
The potential issuance of a Tier 1 bond in place of
a GDR issue would be a key catalyst for the stock.
We estimate this would improve 2014e ROE to
15.7% from our base case of 13.4%.
56
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Commercial Banks
MENA and Turkey
17 July 2013
First Gulf Bank
 We estimate FGB has USD2,939m in surplus capital which should
allow for a mid-tier bank acquisition in Egypt
 Historically, FGB has followed an organic growth model. The
domestic market provides room for FGB to grow public sector
lending
 We maintain our Neutral rating but increase our TP to AED17.9
from AED14.8
Surplus capital
FGB's surplus capital should allow it to acquire a
mid-tier bank in Egypt, but would not be
sufficient to fund the purchase of an associate
stake in a large Turkish bank. We calculate that a
bolt-on acquisition of a mid-tier bank in Egypt
would improve FGB's 2014e ROE by c2.5
percentage points to c21%.
FGB currently has only one small overseas
subsidiary, in Libya, where the bank has a 50%
stake in First Gulf Libyan Bank.
However, we think that FGB is unlikely to follow
the route of making a large acquisition. Unlike the
other Abu Dhabi banks we cover, we see a strong
growth outlook for RWAs for FGB, driven in
particular by growth in public sector lending. This
is due to the lower concentration of public sector
loans to equity at FGB relative to NBAD and
ENBD, the two largest UAE banks. We forecast
FGB’s RWAs to grow at a 10% CAGR 20122017e, ahead of the average of 7% for the other
Abu Dhabi banks that we cover.
We view FGB's current capital retention levels as
adequate and forecast the bank's CAR to reduce to
16.5% in 2017 from c18.5% in 2013. This assumes
a payout ratio of 62% and an ROE of 18-19%.
Investment case
We maintain our Neutral rating. FGB's increased
payout ratio and declining cost of risk in the
medium term mitigate the negative impact on
ROE of reducing pre-provision profitability.
Although we expect FGB's pre-provision
profitability of 3.4% (2013e) to remain above the
sector average of 2.2%, lower NIMs and increasing
growth in operating costs should reduce preprovision profitability gradually to 3% in 2015.
The offset should come from reducing cost of risk,
which we estimate should decline to 40bp by 2015
from 116bp in 2013. In addition, the increased 2013e
pay-out ratio of 62% (vs 43% in 2012) should help
improve ROE. We estimate ROE should improve to
19% in 2015 from 17% in 2013. We expect earnings
to grow 11% yoy in both 2013 and 2014.
FGB’s share price is up 38% in the last 6 months
and is already largely discounting the strong
57
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Commercial Banks
MENA and Turkey
17 July 2013
earnings momentum, in our view. Our increased
target price of AED17.9 values the stock at
11.2/2.0 times EPS/BVPS 2014e.
Our earnings revisions in 2013 and 2014 are 5%
or less.
Changes to earnings
(AEDm)
______ 2013e _______ ______ 2014e _______
New
Old Chg. New
Old Chg.
(%)
(%)
Net Int. Income
5,810 6,060
Total Income
7,746 7,846
Pre provn. Inc.
6,104 6,204
Bad asset chg. (1,437) (1,472)
Pre tax income
4,624 4,689
Net Income
4,343 4,446
(4) 6,060 6,386
8 1,987 1,854
(1) 8,047 8,239
0 (1,834) (1,834)
(2) 6,212 6,405
(2) (1,081) (1,081)
(1) 5,087 5,280
(2) 4,803 5,037
However, we reduce we reduce our long-term
funding cost forecasts by assuming a positive
deposit spread of 10bp vs. 5bp previously. We
also factor in higher earnings growth during the
transition period, increase it to 7% from 5%
previously. Our revised target price is therefore
AED17.9, up from AED14.8 before.
58
(5)
7
(2)
0
(3)
0
(4)
(5)
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Commercial Banks
MENA and Turkey
17 July 2013
 KFH has no surplus capital given the weak profitability outlook
 In any case, KFH already has a presence in Turkey and we
expect the focus to remain here given the strong growth and
superior profitability
 We retain our Underweight rating and target price of KWD0.64
Surplus capital
According to our calculations, KFH has no
surplus capital available for overseas growth
given the weak profitability outlook for the next
1-2 years (due to high impairment levels).
About one-third of KFH’s assets are in the MENA
region. The bank's three main international
subsidiaries are based in Turkey, Malaysia and
Bahrain. The Turkish subsidiary, Kuveyt Turk, is
the largest and contributes 20% of group assets.
This bank has doubled its asset size in the last 2
years and now has a domestic market share of 2%.
Conversely, the Malaysian unit booked net losses
during 2009-2011 due to asset quality issues and
is only starting to recover now and the Bahraini
unit saw flat balance sheet growth over 2008-12
and. It now accounts for less than 10% of the
group balance sheet.
KFH also has two subsidiary entities in Saudi
Arabia. Baitak Real Estate Investment Company
focuses on real estate development and
investment while Saudi KFH focuses on Islamic
investments.
We think KFH’s focus in international markets
will remain on Turkey given its history of strong
growth and superior profitability. Kuvyt Turk has
expanded assets at 45% pa over 2007-12 and has
an ROE of 17%, 100bp higher than the Turkish
average of 16%.
KFH asset split (2012)
N America
3%
Middle East
W Europe
64%
5%
Others
28%
KFH’s international associates
Name
Stake
Diyar Homes
50%
Al Durrat Al Tijaria
50%
Sharjah Islamic Bank 20%
Country Business
Bahrain Real estate development
Bahrain Real estate development
UAE
Islamic Banking
59
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Commercial Banks
MENA and Turkey
17 July 2013
Key international subsidiaries (2012)
Name
Stake
Assets
(USDm)
ROE
% group
assets
KFH Turkey
KFH Bahrain
KFH Malaysia
62%
93%
100%
10,331
4,082
3,168
17.0%
3.0%
1.0%
20%
8%
6%
Source: companies, Note: KFH started operations in Turkey, Bahrain and Malaysia by
establishing its own subsidiary companies
Investment case
We estimate KFH has the lowest NPL coverage
ratio amongst the Kuwaiti banks we cover, at
52%. We estimate average cost of risk for 20132015 will be around 170bp. Although this is low
relative to 2011-12 levels, it is still high relative to
the sector average of 100bp. KFH faces pressure
on its net interest margin given its retail focus.
Retail loans re-price with a lag in Kuwait given
that retail rates cannot be changed during the first
five years of the tenure. More than 30% of KFH's
loan portfolio is retail, due to which we estimate
the net interest margin will fall by 30bp by 2015
compared to 2012.
We estimate ROE will improve to c11% in 2015
from 7% in 2012 driven by lower cost of risk.
However, we believe this improvement is more
than priced into the stock, which is trading at 1.5x
2013e BVPS. We retain our Underweight rating
and target price of KWD0.64.
The changes to our net income estimates are
marginal. Although we revise up our otherincome estimates on the back of Q1 2013
numbers, this is more than offset by higher
income taxes and minorities.
60
KWDm
Net int. inc.
Fee income
Other income
Total income
Op. costs
Core income
Impairments
PBT
Taxes
PAT
Minority interest
Net income
2013e
old
2013e % ch
new
2014e
old
2014e % ch
new
380
75
240
695
(335)
360
(210)
150
(7)
143
24
167
386
2%
83 11%
286 19%
756
9%
(344)
3%
411 14%
(215)
2%
196 31%
(4) -51%
193 35%
(29) -221%
164 -2%
422
85
269
777
(362)
414
(197)
218
(10)
207
(1)
206
414 -2%
94 10%
333 24%
841
8%
(374)
3%
467 13%
(221) 13%
245 13%
(7) -34%
238 15%
(36) 2874%
203 -2%
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Commercial Banks
MENA and Turkey
17 July 2013
Masraf Al Rayan
 Masraf’s surplus capital only allows for organic growth in Turkey;
in Egypt there are very few Islamic banking opportunities
 Proposed acquisitions in Libya and the UK should not materially
alter net income growth, in our view
 We retain our TP of QAR24 with an Underweight rating
Surplus capital
Masraf’s international operations
We estimate that Masraf has a surplus capital
position of USD450m which is lower than the
minimum capital requirement that we calculate
for inorganic expansion in Egypt or Turkey. But it
could potentially be used to acquire a new
banking license in Turkey; Bank Audi recently
paid USD300m for such a license. However, in
Egypt there are fewer opportunities for Islamic
banking entry at present as the banking industry is
dominated by conventional banks.
Name
According to a Reuters article dated 28 January
2013, Masraf is looking to acquire a strategic
stake in a Libyan Commercial Bank as well as a
70% stake in Islamic Bank of Britain. However,
both these acquisitions would be quite small
relative to the balance sheet size of Masraf. Hence
they would be unlikely to change Masraf’s net
income split materially.
At present, Masraf’s international operations are
limited to associate stakes in certain real estate
service and leasing companies in Oman and
Saudi Arabia.
Country Stake
National Mass Housing
Kirnaf Investment and
Instalment company
Oman
Saudi
20%
48%
Business segment
Real estate services
Leasing
Qatar
93%
International
7%
Investment case
We expect the net interest margin at Masraf to be
negatively affected by the rollover of Sukuks
issued by the Qatar Government in 2011 because
these represent a greater proportion of assets at
the Islamic banks compared to the conventional
banks. We estimate the impact on Masraf’s 2014e
net income should be -7% (higher than the
average of -1% for the conventional banks).
61
Commercial Banks
MENA and Turkey
17 July 2013
In our view, Masraf also carries downside risk due
to under-provisioning given that its stock of loan
loss provisions equated to only 0.11% of total
2012 lending. We estimate the average cost of risk
will rise to 30bp (2013-2015e) relative to the past
average of 10bp (2008-12). We estimate the ROE
will decline to 14% in 2015 from 17% in 2012.
We retain our target price of QAR24 and maintain
our Underweight rating.
62
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Commercial Banks
MENA and Turkey
17 July 2013
National Bank of Abu
Dhabi
 We estimate NBAD has USD6,870m in excess capital, the highest
among the MENA banks we cover.
 With a fairly mature domestic market share, we think NBAD will
use its surplus capital for international growth
 We maintain our Neutral rating but increase our TP to AED12.7
from AED11.27
Surplus capital
The large loan concentration in the public sector
segment relative to the bank's equity means that
NBAD will likely cap its payout ratio to preserve
shareholders' equity. We give more detail on this
issue in our research note “In search of ROE
optimisation: Overweight FGB and ADCB”,
published on 11 June 2012. We assume the payout ratio will rise to only 33% by 2015, from 21%
in 2012. International diversification of assets and
earnings therefore becomes an attractive option, in
our view.
NBAD has the largest surplus capital position
among the MENA banks we cover, which allows
it plenty of scope to grow its international
business, both organically and through
acquisitions. We estimate that the current surplus
capital should allow NBAD to pursue either an
associate investment in a large-tier Turkish bank
or a majority acquisition in Egypt.
We estimate that an associate acquisition in
Turkey could enhance NBAD's 2014e ROE by c5
percentage points, to 20% from 15%. Meanwhile,
a majority acquisition of a mid-tier private sector
bank in Egypt could enhance the ROE by 2
percentage points (assuming additional capital
investment to generate asset growth of 46% per
annum in the acquired entity).
NBAD currently derives 16% of its operating
income from the International Banking division.
Currently, NBAD operates a private banking
subsidiary in Switzerland, a banking operation in
Malaysia, and a brokerage unit in Egypt. In its Q4
2012 investor presentation, NBAD made clear its
plans to set up offices in Lebanon, South Sudan,
Brazil, Turkey, India and South Korea in
2013/2014 and to consolidate its existing network
in Egypt, Oman, Jordan, Sudan and Bahrain.
Investment case
We estimate that NBAD's strategy to grow
organically in faster growth emerging markets
should lead to a 10-11% per annum increase in
costs, ahead of our revenue growth forecast of
63
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Commercial Banks
MENA and Turkey
17 July 2013
c8% per annum over the next 5 years. As a result,
we expect a moderate deterioration in NBAD's
cost-income ratio to 38% by 2016 from 33% in
2012. We also think that the high surplus capital
position increases the risk of value-destroying
acquisitions.
Our earnings estimate revisions are less than 5%
for 2013 and 2014. We summarise the changes in
the following table.
Changes to estimates
(AEDm)
On a positive note, improved liquidity coverage,
122% in 2012 up from 68% in 2011, means that
NBAD should be able to further reduce its
funding costs. The loan-to-deposit ratio in Q1
2013 dropped to 79% from 87% a year ago. We
forecast funding costs to decline to 1.9% by 2015,
down from 2.2% in 2012. NBAD also has the
lowest NIM among Abu Dhabi banks we cover, at
2.3%. We therefore think that the NIM should
remain stable, unlike FGB where there is
downside risk to its above-sector NIM.
64
______ 2013e _______ ______ 2014e ______
New
Old Chg. New
Old Chg.
(%)
(%)
Net Int. Income
6,388 6,457
Total Income
9,508 9,436
6,329 6,219
Pre provn. Inc.
Bad asset chg. (1,255) (1,255)
Pre tax income
5,074 4,964
Net Income
4,682 4,575
(1) 6,842 7,025
5 3,000 3,001
1 9,842 10,026
(1) (3,497) (3,539)
2 6,345 6,488
0 (990) (990)
2 5,355 5,498
2 4,955 5,093
(3)
(0)
(2)
(1)
(2)
0
(3)
(3)
However, we have raised our transition period
earnings growth to 8% from 5% previously. This
is to recognise NBAD's stronger earnings growth
potential given its high surplus capital position.
As a result, we increase target price to AED12.7
from AED11.27.
abc
Commercial Banks
MENA and Turkey
17 July 2013
 NBK has surplus capital of USD2.5bn, but it already has a
presence in both Egypt and Turkey
 The positive catalyst for the stock would be a pick-up in Kuwaiti
spending given NBK’s domestic focus
 We retain our TP of KWD1.02 and maintain our Neutral rating
Surplus capital
NBK’s international associates
We calculate that a 25% associate stake in a large
Turkish bank would cost cUSD3.5bn which is
more than the estimated surplus capital of
USD2.5bn at NBK. Though NBK would be
capable of making either an associate or majority
acquisition in Egypt, the fact is that it already has
a presence in the country. NBK has a majority
stake in Al Watani, a small Egyptian bank with a
balance sheet size of USD270m and a 1.3% asset
market share. NBK acquired this bank in 2007.
Associates
Carrying value
(KWDm)
Stake
Business
segment
132
31
41
5
30%
40%
25%
22%
Banking
Banking
Banking
Banking
International Bank of Qatar
Turkish Bank
Syariah Muamalat Indonesia
United Capital Bank, Sudan
Operating income split (2012)
other
MENA
15%
NBK derives 80% of its operating income from
Kuwait and a further 15% from other MENA
countries, including 4% from Al Watani Bank.
In Turkey, NBK has a 40% stake in a small
Turkish Bank (TurkishBank A.S.) which has 19
branches in the country but an asset market share
of less than 1%, we estimate. Therefore, it does
not contribute meaningfully to NBK's net income.
Europe
3%
Kuw ait
80%
Others
2%
NBK also has associates in Sudan, Qatar and
Indonesia.
65
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Commercial Banks
MENA and Turkey
17 July 2013
Key subsidiaries
USDm (2012)
Subsidiaries
Al Watani, Egypt
Boubyan Bank*
Country
Stake
Assets
ROE
Year of
acquisition
Turkey
Kuwait
98.0%
58.0%
2,568
524
16.5%
4.1%
2007
2009
Source: company data, HSBC estimates, * valuation multiples based on 40% stake acquired in 2009 in Boubyan by NBK
Investment case
We remain convinced that the biggest catalyst for
NBK is a pick-up in project spending in Kuwait
given its domestic focus. For more details on this
please refer to our report “Kuwaiti banks: ROE
improvement will be difficult, but we see no
negative catalysts ahead” dated 19 April 2012.
Kuwaiti credit growth remains slow, at only 5%
yoy (based on April 2013 central bank data). We
estimate NBK will increase lending 9% yoy
(including Boubyan Bank) in 2013, which
compares with 22% for Burgan Bank and 13%
11% for KFH. This leads to a flat ROE of c17%
in 2013e which seems to be already priced into
the stock, trading at a 1.9x P-NAV (2014e). We
retain our target price of KWD1.02 and maintain
our Neutral rating on the stock.
66
Implied valuation
multiples
P-NAV
PE
4.2
7.4
28.1
n/a
abc
Commercial Banks
MENA and Turkey
17 July 2013
 NBO has no surplus capital for overseas expansion
 NBO has branch networks in Egypt and the UAE, however their
contribution to group net income is only 4%
 We retain our TP of OMR0.32 and maintain our Neutral rating
Surplus capital
We estimate NBO has no surplus capital to invest
in overseas operations. Furthermore, commercial
Bank of Qatar (CBQ) holds a 35% stake in NBO
and NBO cannot raise more capital unless CBQ is
willing to contribute additional capital. We think
this is unlikely to happen until CBQ raises
additional capital onto its own balance sheet.
CBQ has also recently acquired a small bank in
Turkey and therefore any further capital
contribution from CBQ to NBO would also
depend on its capital allocation plans between
Turkey and other international operations.
At present, NBO derives more than 95% of its net
income from domestic operations. The bank has
70 branches in Oman which compares with 3
branches in Egypt and 1 branch in the UAE.
Egypt and the UAE together contribute 4% of
group net income.
UAE
2%
Oman
96%
Egy pt
2%
Investment case
A higher proportion of retail loans, which are repricing downwards, and the absence of
Government support on the funding side, mean
that NBO’s margins are under more pressure than
those of Bank Muscat. We also forecast only
single-digit growth in fees and commissions over
2012-2015 given tighter regulations on retail
lending. Bank Muscat’s fee stream is less affected
due to the greater proportion that is derived from
corporate finance, card acquisition and investment
banking business. We retain our target price of
OMR0.32 and our Neutral rating.
67
abc
Commercial Banks
MENA and Turkey
17 July 2013
Qatar Islamic Bank
 QIB has no surplus capital; the low profitability as a result of high
impairments is the key reason for this
 In any case, QIB is likely to retain its domestic focus given the
demands of the local Islamic banking industry
 We retain our TP of QAR75 and maintain our Neutral rating
Surplus capital
QIB’s international operations
We estimate that QIB has no surplus capital after
taking into account domestic credit growth. A key
reason is the low expected ROE as a result of high
impairments (both credit- and investment-led).
Name
Country
Stake
Business
segment
Panmure Gordon
Arab Finance House
Asia Finance Bank
UK
Lebanon
Malaysia
44%
37%
42%
Brokerage
Banking
Banking
At present, a majority of QIB’s net income is
derived from domestic operations, where it has a
network of 29 branches. QIB does have banking
operations in Lebanon and Malaysia, and a
brokerage unit in United Kingdom, but in aggregate,
the international operations are not profitable.
We think QIB is likely to maintain its domestic
focus going forward, for two reasons.
1. Conventional banks cannot undertake Islamic
business in Qatar according to a regulation issued
by the Central Bank of Qatar in 2011.
2. QIB has little competition in Islamic retail
business. The bank's largest competitor, Masraf
Al Rayan, focuses on the public sector and
corporate lending. Masraf has only a small retail
operation with less than half the number of
branches that QIB has.
68
Investment case
We expect the net interest margin at QIB to be
more negatively affected by the rollover of the
Sukuks issued by the Qatar Government in 2011
because these represent a greater proportion of
assets at the Islamic banks compared to the
conventional banks. We estimate the impact on
QIB’s 2014 net income will be be -8% (higher
than the average of -1% for conventional banks).
QIB also faces impairment pressure due to its low
NPL coverage and from its international
investment portfolio. We estimate an impairmenttotal asset ratio of 50bp in both 2013 and 2014,
which is higher than the historical average of
25bp. We retain our Neutral rating and target
price of QAR75.
abc
Commercial Banks
MENA and Turkey
17 July 2013
QNB
 QNB’s surplus capital position of USD3.8bn could accommodate
an associate acquisition in Turkey
 Both Egypt and Turkey are key long-term growth markets for QNB
given Qatar’s limited size; QNB recently acquired NSGB in Egypt
 We maintain our OW rating but increase our TP to QAR200 from
QAR185. QNB is a GEMS Super 15 Portfolio constituent
Surplus capital
According to our calculations, QNB will have
USD3.8bn in surplus capital after taking account
of growth in domestic risk weighted assets over
2012-2015e. We highlighted in the previous
section that QNB could benefit from acquiring an
associate stake in a large Turkish bank. Such an
acquisition would be in line with QNB's stated
strategy of acquiring banks in Egypt and Turkey.
contribution over time. Markets which could
potentially contribute 20% of group net income
are classified as home markets. The equivalent
ratio is 5% for network markets.
QNB’s net income split (2013e)
International
27%
We estimate that QNB will derive 27% of its 2013
net income from international operations (up from
20% in 2012) after consolidating NSGB. QNB
now has four international subsidiaries, in Egypt,
Syria, Indonesia and Iraq.
Qatar
73%
QNB also has associate stakes in banks in Jordan,
Qatar, the UAE, Tunisia and Libya. Of these
entities, Commercial Bank International (UAE)
and Housing Bank for Trade and Finance (Jordan)
contribute the majority of the profits from
associates.
We think QNB will target countries with underpenetrated banking markets, potential for secular
growth and favourable demographics (i.e. Turkey,
Egypt, Morocco etc). Over time, this should
support the bank's long-term growth given Qatar’s
limited size.
QNB divides its target markets into ‘home
markets’ and ‘network markets’. This
classification is based on the potential net income
Historically, QNB has been judicious when it
comes to making acquisitions. The bank acquired
a majority stake in NSGB for 1.8x NAV in Q4
69
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Commercial Banks
MENA and Turkey
17 July 2013
Key subsidiaries and associates
USDm (2012)
Country
Stake
Assets
ROE
Year of
acquisition
Subsidiaries
NSGB
QNB Syria
Mansour Bank
Kesawan
Egypt
Syria
Iraq
Indonesia
97.2%
50.8%
51.0%
40.2%
9,006
339
350
428
18.0%
14.7%
5.4%
-2.9%
2012
2009
2006
2011
1.8
Organic
n/a
n/a
11.0
UAE
Jordan
40.0%
35.0%
3,490
9,960
12.5%
9.9%
2008
2007
2.9
1.4
14.7
12.0
Associates
Comm. Bank Intl.*
Housing Bank for Trade and Finance
Implied valuation
multiples
P-NAV
PE
n/a
n/a
Source: company data, HSBC estimates, Note: * implied valuation multiples for Comm. Bank Intl. based on 24% stake acquired in 2008
Net int. inc.
Non int. inc
Total income
Op. costs
Core income
Impairments
PBT
Other income
Taxes & MI
PAT
11,282
2,857
14,139
(2,962)
11,177
(1,670)
9,508
257
(320)
9,445
2013e % ch
new
11,282
2,857
14,139
(2,962)
11,177
(1,670)
9,508
257
(320)
9,445
2014e % ch
new
0.0% 12,873 12,918 0.4%
0.0%
3,374 3,377 0.1%
0.0% 16,247 16,296 0.3%
0.0% (3,314) (3,314) 0.0%
0.0% 12,933 12,982 0.4%
0.0% (1,643) (1,649) 0.4%
0.0% 11,290 11,332 0.4%
0.0%
284
284 0.0%
0.0%
(458) (458) 0.1%
0.0% 11,116 11,158 0.4%
P-NAV 1 yr fwd chart: QNB is up 20% in the last 6m, but its
valuation is still attractive
5.0
4.0
1SD+
3.0
2.0
1SD-
1.0
Jul-13
Jul-12
Jul-11
Jul-10
Jul-09
0.0
Source: Bloomberg, HSBC estimates
70
2014e
old
Source: HSBC estimates, we classify associate income as part of non-interest income in this table
Jul-08
We increase our target price to QAR200 from
QAR185 as we increase our credit growth
estimates over 2014-17, to 19% pa from 17%
before, given the recent improvement in project
awards in Qatar. Our changes to near-term
earnings estimates are marginal in nature.
2013e
old
Jul-07
We forecast lending activity will grow by a c20%
2012-15 CAGR (including NSGB), outperforming
the Qatari sector by 5 percentage points. QNB
offers earnings growth of 15.7% pa over 20122014e and a 2014e ROE of c22% (versus the
CEEMEA banks averages of 11% in peer table
and 17%, respectively). The ability to maintain
the net interest margin in the face of continuing
declines in asset spreads is a key differentiator for
QNB. We estimate QNB will reduce its cost of
funding by 16bp (including NSGB) over 2013-15.
QARm
Jul-06
Investment case
Jul-05
2012. Assuming a 20% control premium, the
implied P-NAV works out to 1.4x, which we see
as an attractive multiple for an 18% ROE bank.
abc
Commercial Banks
MENA and Turkey
17 July 2013
Riyad Bank
 We estimate Riyad bank to have USD2,664m in excess capital,
which allows the bank to pursue both associate and majority
acquisitions in Egypt
 We think a foreign acquisition could work as a positive catalyst for
Riyad Bank, unlocking its surplus capital and improving ROE
 However, the investment case centres on slow deployment of
surplus capital for growth. We rate the stock Neutral, TP SAR27
Surplus capital
Investment case
Surplus capital of USD2,664m is sufficient to allow
Riyad Bank to acquire either an associate or a
majority stake in a small-to-mid-tier bank in Egypt.
The investment debate on Riyad Bank centres on its
ability to accelerate deployment of its surplus
capital. Better capital consumption should result in
an improvement in ROE to above the current 11%.
However, we think the bank is unlikely to change
its domestic banking focus, and therefore we
forecast low growth in risk-weighted assets: 3% in
2013 and 8% in 2014. Our base-case forecast
excludes any foreign deployment of surplus capital.
Although we think Riyad Bank should be able to
sustain its ROA at 1.8-1.9% in 2013 and 2014, the
same level as in 2012, this will not be enough to
take return on equity above 11%.
We estimate that an associate acquisition would
improve ROE to 12% from 11% in 2014. The
positive impact on ROE of a majority acquisition
would be greater, at 2 percentage points, raising
ROE to 15% in 2015e.
Hence, we view deployment of capital outside of
Saudi Arabia as a positive catalyst for Riyad Bank.
Riyad Bank does not have any international
operations currently. It has 2 wholly owned
subsidiaries in Saudi Arabia: Riyad Capital and
Ithra Al-Riyad Real Estate Company.
71
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Commercial Banks
MENA and Turkey
17 July 2013
Samba
 We estimate Samba has USD3,358m in excess capital, which is
the second highest among the Saudi banks we cover, after Alrajhi
 We think that deployment of surplus capital into a faster growth
emerging market could work as a positive catalyst for Samba
 Meanwhile, having the second-lowest operating and funding cost
bases in Saudi are competitive advantages. Samba also has a
high level of provision coverage. We rate the stock Overweight,
TP SAR67
Surplus capital
We think that the acquisition of either an associate
or a majority stake in a small-to-mid-tier bank in
Egypt would serve as a catalyst for Samba.
We estimate a positive 2014e ROE impact of 1
percentage point in the event of an associate
acquisition, and a 2 percentage point 2015e ROE
impact in the event of a majority acquisition.
Samba has hitherto made only one foreign
acquisition. This was in 2007 when Samba
acquired majority ownership in the then-named
Crescent Commercial Bank, now known as
Samba Bank Limited Pakistan. The subsidiary
provides commercial banking services and turned
profitable in 2011 for the first time. We also note
that Samba increased its ownership in the
subsidiary in 2010, from 68% to 81% currently.
Investment case
We estimate Samba can sustain its funding cost
advantage, which is the second lowest among the
72
Saudi banks we cover. Its ratio of demand deposits
to total deposits increased to 63% in Q1 2013 from
60% in Q4 2012.
We estimate the NIM should trough in 2013 at
2.25% before improving to 2.33% in 2014 on an
improving loan-asset ratio. We note that Samba,
along with BSF, currently has the lowest NIM in
the sector. We view the risk of further loan spread
compression at Samba as low, in particular in the
corporate loan market, as its loan spreads are
among the lowest among Saudi banks.
Samba's low cost-asset and cost-income ratios,
1% and 29%, respectively, mean that earnings are
strongly geared to a potential recovery in
revenues. We forecast EPS to grow 3% in 2013,
followed by 12% in 2014.
We see less upside risk to cost of risk at Samba
due to its healthy provision coverage ratio, which
remains solid at 128% even if adjusted for pastdue-but-not-impaired loans.
abc
Commercial Banks
MENA and Turkey
17 July 2013
Union National Bank
 We estimate that UNB has USD2,170m in surplus capital but UNB
has historically followed an organic growth model
 In addition, the large loan loss provision shortfall should put
constraints on any spending of the surplus capital. We think an
increase in the pay-out ratio is more likely than international
expansion
 We downgrade UNB to Neutral from Overweight on valuation with
a new TP of AED5.2 from AED4.67
Surplus capital
Investment case
UNB's surplus capital of USD2,170m would
allow it to acquire an associate stake in a small-tomid-tier bank in Egypt. We estimate such an
acquisition would enhance UNB's ROE by 2
percentage points to 15% from 13% (2014e).
We downgrade UNB to Neutral from Overweight
on valuation. Our Overweight view was based on
a large 40% valuation discount relative to where
we thought the stock should trade given our
estimate of the loan loss provision shortfall and
the risk to book value of the bank. UNB's share
price is up 63% in last 6 months and the stock is
now trading at a 20% discount to book value. Our
view on the loan loss provision shortfall, in the
meantime, remains unchanged.
However, we think that UNB's loan loss provision
shortfall, which we estimate to be equal to 88% of
2012 core income, will constrain balance sheet
growth and any use of surplus capital. We therefore
think UNB is likely to continue to follow an organic
growth model in the UAE. We also think that any
improvement in provision coverage levels and
liquidity is more likely to trigger an increase in the
dividend pay-out ratio than to result in international
expansion. We forecast a payout ratio of 25% in the
medium term.
We raise our earnings forecasts by 12% in 2013
and by 10% in 2014 as we now expect stronger
net interest income on account of lower funding
costs. We also assume better cost discipline in the
medium term.
UNB earns 93% of its operating income in the
UAE but does operate a small subsidiary in Egypt,
UNB Egypt, of which it owns 95%. UNB Egypt
operates 28 branches in the country.
73
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Commercial Banks
MENA and Turkey
17 July 2013
Changes to estimates
(AEDm)
______ 2013e _______ ______ 2014e _______
New
Old Chg. New
Old Chg.
(%)
(%)
Net Int. Income
Non Int. Income
Total Income
Operating costs
Pre provn. Inc.
Bad asset chg.
Pre tax income
Net Income
2,634
566
3,201
(803)
2,397
(564)
1,833
1,697
2,524
544
3,068
(837)
2,232
(580)
1,652
1,518
4
4
4
(4)
7
(3)
11
12
2,699
623
3,323
(828)
2,494
(535)
1,959
1,822
2,657
603
3,260
(878)
2,381
(586)
1,795
1,659
These earnings revisions lead us to increase our
target price to AED5.2 from AED4.67.
74
2
3
2
(6)
5
(9)
9
10
Commercial Banks
MENA and Turkey
17 July 2013
abc
Turkish Banks
75
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Commercial Banks
MENA and Turkey
17 July 2013
Akbank
 Coming from a low base, the balance sheet shift from securities to
loans and, within loans, from corporate to retail and SME, should
help the bank to protect its margins
 The high CAR and Tier-1 ratios should support long-term growth.
We expect a re-rating and for the valuation gap with Garanti to be
closed
 We have lowered our 2013 net income estimate by 9% and
increased the RfR to 7% from 5.5%; hence our TP declines to
TRY9.3 from TRY12.7, but we maintain our Overweight rating
Successful implementation of strategy
should result in a re-rating
Akbank announced its operating plan for 2013-15
at the start of 2013, in which “sustainable
leadership through profitable growth” is expected
to be achieved through a combination of:
 Profitable growth: increasing market share in
all areas; changing the loan mix towards a
greater proportion of higher-margin products
and segments; diversifying and expanding the
deposit base; and continuing to focus on fee
and commission business.
 Prudent management: focussing on
sustainability by means of risk control while
growing.
 Executional excellence: maintaining a
consumer-focussed approach, superior
customer service and state-of-the art CRM.
76
 Superior infrastructure: including superior HR
and IT, outstanding credit risk management and
re-positioning of alternative delivery channels.
We believe the bank is on the right track with the
road-map announced at the beginning of the year.
In Q1 2013, the share of loans to assets increased to
59% from 56% in the previous quarter. The bank’s
focus on high profit areas continues, with close
attention being paid to the risk attached to the highrisk/high-return areas.
Akbank’s 2013 target is an ROA of 2.0% and
leverage of c8x, to result in an ROE of 16%, with a
rise in the NIM (after swaps) of 30bp, and a cost of
risk of 60bp. Although our estimates (adjusted for
the Competition Board penalty of TRY129m) point
to a 13.4% 2013 ROAE for Akbank, that figure will
be under pressure from the sharp rise in interest rates
in 2013. If an ROE close to management guidance
were to be achieved, we believe this would lead to a
further re-rating of the stock.
abc
Commercial Banks
MENA and Turkey
17 July 2013
Financials
We have revised our estimates for Akbank to reflect
the recent rise in interest rates. Among the Turkish
banks under our coverage, Akbank’s balance sheet
structure is one of the better positioned in the face of
rising interest rates. We have lowered our NIM
estimate for Akbank by 8bps to 3.70% for 2013,
which is down 3bps y-o-y, and has a 2% negative
impact on the NII. We have also increased our CoR
assumption by 24bps to reflect the impact of a
potential slowdown in the economy due to lower
affordability of credit. Our new net income estimate
is TRY3.0bn, up 3% y-o-y and 9% lower than our
previous estimate, and implying a 13.4% ROAE.
non-volatile stocks, the Neutral band is 5pp above
and below the hurdle rate for Turkish stocks of
12.5%. Hence, we maintain our Overweight rating
on Akbank.
The current 2013e multiples of 8.8x PE and 1.2x
PBV stand at a premium to peers yet, given its
superior sustainable ROAE and Tier-1 ratio, we
believe Akbank deserves an even higher premium.
Potential return equals the percentage difference
between the current share price and the target price,
including the forecast dividend yield when indicated.
estimate by 3%, mainly due to a higher total
provisioning estimate. Our 2014 net income
estimate now stands at TRY3.56bn, up 18% y-oy. Our net income estimates are 9% and 1% lower
than consensus for 2013 and 2014, respectively.
Valuation
Our higher CoE (we have increased our CoE
assumption for Akbank to 13.1% from the previous
11.0%) and lower earnings estimates result in a
downward revision of 27% to our residual income
DCF-driven target price for Akbank. Our new 12month forward target price is TRY9.3 (versus
TRY12.7 previously), which implies a 35%
potential return. Under our research model, for
Akbank: summary financials and forecast changes
____ New estimates (TRYm) _____
2012
2013e
2014e
__________y-o-y growth ___________
2012e
2013e
2014e
__ new versus old ____
2013e
2014e
NII
Total revenues*
Total provisions*
Operating expenses
Net income
5,200
7,549
944
2,898
2,950
5,899
8,689
1,319
3,364
3,024
6,501
9,450
1,288
3,672
3,564
30%
32%
156%
19%
23%
13%
15%
40%
16%
3%
10%
9%
-2%
9%
18%
-2%
-1%
26%
0%
-9%
2%
1%
19%
0%
-3%
NIM
NPL ratio**
ROAE
3.73%
1.3%
0.62%
15.3%
3.70%
1.7%
0.88%
13.4%
3.62%
2.0%
0.74%
14.5%
38bps
-51bps
59bps
142bps
-3bps
48bps
26bps
-181bps
-7bps
27bps
-13bps
107bps
-8bps
20bps
24bps
-92bps
7bps
31bps
16bps
25bps
Note: *adjusted for NPL recoveries ** adjusted for write-offs
77
abc
Commercial Banks
MENA and Turkey
17 July 2013
Garanti Bank
 Garanti management's superior ability to discern trends, set
guidance and deliver on it will continue to be the key
differentiating factors
 The bank is trading at a justified premium to peers, in our view; we
would still expect it to lead any re-rating of the Turkish banks once
interest rates stabilise
 We lower our 2013e net income by 8% and increase the RfR to
7% from 5.5%; hence our TP declines to TRY10 from TRY13 but
we maintain our Overweight rating
Always good at discerning the trends;
trading at a justified premium
but, we believe, deserves to trade at a premium to
most of its peers.
Garanti Bank has been the Turkish bank best known
for its good communication with investors –
providing good guidance and delivering on it
successfully.
On a 2013e PE and PBV of 8.9x and 1.3x,
respectively, Garanti is the bank currently trading at
the highest premium to the peer group average.
However, we would still expect it to lead any rerating of the Turkish banks once interest rates
stabilise.
2013 has been no exception so far. At the start of
the year, the bank announced its budget plan for
2013, which was more optimistic than both the buyside and the sell-side had been looking for. Garanti
was expecting further rate cuts and accommodative
monetary policy and, therefore, was guiding for y-oy margin expansion in 2013, compared to consensus
expectations of a c20bps contraction. The following
months proved that Garanti Bank’s projections were
correct and management once again proved that it
read the signals better than most others.
Having a high quality management team, a good
track record on guidance and delivery, a strong
balance sheet and strong profitability, Garanti is not
only the benchmark for the Turkish banking sector
78
In Q1 2013, the bank maintained its selective and
profit-focused lending growth, while at the same
time actively managing its securities portfolio to
support its margins. In terms of liquidity, the bank
has maintained its solid and well-diversified
funding mix (using a combination of repos,
foreign funding and bond issuance). The bank’s
solvency is very strong, with Basel II CAR at
18%, and leverage at 6.5x, as at Q1 2013.
Financials
We have revised our estimates for Garanti Bank
to reflect the recent rise in interest rates. Among
abc
Commercial Banks
MENA and Turkey
17 July 2013
the Turkish banks under our coverage, Garanti
Bank’s balance sheet structure is averagely
positioned in the face of rising interest rates.
We have lowered our 2013 NIM estimate by 8bps,
to 3.90%, which is down a mere 1bps y-o-y. That
results in a 2% lower NII, at TRY6.4bn, up 11% yo-y. On the asset quality side, we have revised our
2013 CoR estimate up by 25bps, which results in a
34% rise in the total provisioning expenses
estimates. Our 2013 net income estimate now stands
at TRY3.27bn, up 6% y-o-y, and implying a 14.8%
ROAE. Our estimate is 9% lower than consensus.
For 2014, we now look for a NIM that is 2bps higher
than our previous estimate, at 3.69%, down 21bps yo-y. With a 14bps higher CoR assumption, we now
look for 16% earnings growth in 2014. Our net
income estimate for 2014 stands at TRY3.8bn,
which is in line with consensus and implies an
ROAE of 15.6%.
stocks of 12.5%. Our target price of TRY10 implies
a potential return of 40%, which is above the Neutral
band of our model. Hence we maintain our
Overweight rating on Garanti.
The 2013e multiples of 8.9x PE and 1.3x PBV
stand at a premium to peers yet, given the superior
sustainable ROAE and Tier-1 ratio, we believe
Garanti’s premium is well deserved and expect it
to remain.
between the current share price and the target
price, including the forecast dividend yield when
indicated
Valuation
assumption for Garanti Bank to 13.1% from the
previous 11.0%) and lower earnings estimates result
in a downward revision of 23% in our residual
income DCF-driven target price for Garanti Bank.
Our new target price is TRY10, down from TRY13.
Under our research model, for stocks without a
volatility indicator, the Neutral band is 5 percentage
points above and below the hurdle rate for Turkey
Garanti Bank summary financials and forecast changes
______ New estimates (TRY) ______ __________y-o-y growth ___________
2012
2013e
2014e
2012
2013e
2014e
____ New vs old _____
2013e
2014e
NII
Total revenues*
Total provisions*
Operating expenses
Net income
5,719
8,475
1,043
3,541
3,070
6,345
9,346
1,174
3,922
3,267
6,799
10,161
1,147
4,320
3,799
22%
19%
287%
10%
0%
11%
10%
12%
11%
6%
7%
9%
-2%
10%
16%
-2%
-1%
34%
0%
-8%
1%
1%
20%
0%
-2%
NIM
NPL ratio**
ROAE
3.91%
2.3%
0.72%
15.9%
3.90%
2.3%
0.75%
14.8%
3.69%
2.4%
0.61%
15.6%
34bps
46bps
92bps
-229bps
-1bps
8bps
2bps
-109bps
-21bps
4bps
-14bps
77bps
-8bps
5bps
25bps
-90bps
2bps
4bps
14bps
55bps
Note: *adjusted for NPL recoveries ** adjusted for write-offs
79
abc
Commercial Banks
MENA and Turkey
17 July 2013
Halkbank
 Strong fundamentals: strong capital, high liquidity and superior
profitability
 Attractive valuation: highest profitability (2013e ROAE of 20%)
but trading at a discount to peers (2013e PE of 7.0x and PBV of
1.0x)
 A GEMs Super 15 portfolio constituent: we lower our 2013e net
income by 2% and increase the RfR to 7% from 5.5%; hence our
TP declines to TRY23 from TRY28.5 but we maintain our
Overweight rating
A GEMs Super 15 stock
Halkbank has strong fundamentals, with strong
capital (CAR at 15.9% and Tier-1 at 14.1% as of
March 2013) and high liquidity (the lowest loan-todeposit ratio among the large-cap Turkish banks:
86% as of March 2013). It also has high profitability
(the highest ROAE among the large cap Turkish
banks, at 25% in 2012), and an attractive valuation
(trading at a 2013e PE of only 7.0x).
We prefer Halkbank to the other Turkish large-cap
banks under our coverage as it has the lowest ratio of
fixed rate assets to interest earning assets (31% in Q1
13), making it the most defensive in the face of
rising TRY rates.
As it has been the case for at least the last 10
earnings releases, the bank’s net income in Q1 was
better than consensus estimates. Although operating
expenses were up sharply (+39% y-o-y), the bank’s
revenue performance was also strong, resulting in
net income TRY713m, implying an ROAE of 23%.
The bank’s ROAE has been falling as the cap on
80
dividend pay-outs limits the ability to leverage; we
expect the ROAE to decline to 20% in 2013.
Nowadays, the key discussion area in relation to
Halkbank is the new credit card loyalty scheme,
called “Paraf”, and its potential impact on the bank’s
financials. The management believes that the new
venture is a feasible one and that it will support the
bank’s margins and the fees and commissions that it
generates. Since Halkbank has a very low costincome ratio (32% in 2012), the management
believes that there is room to invest in that business.
However, the market is currently focusing on the
impact of the new venture on operating expenses
while, we believe, underestimating the potential
positive impact of a credit card loyalty scheme on
fees, commissions and margins. If the bank does
successfully manage the credit card venture, that
should also be a positive catalyst in the medium to
long term.
abc
Commercial Banks
MENA and Turkey
17 July 2013
Financials
We have revised our estimates for Halkbank to
reflect the recent rise in interest rates. Among the
Turkish banks under our coverage, Halkbank’s
balance sheet structure is one of the best positioned
in the face of rising interest rates.
Our relatively conservative 2013 net income
estimate now stands at TRY2.65bn (down 2% from
our previous estimate). That puts us 2% higher than
consensus. Among the banks under our coverage,
Halbank is the only bank where we did not have a
downward revision to our NIM forecast (as our
previous NIM forecast was already very
conservative). The downward revision to earnings is
mostly due to a 9bps higher CoR compared to our
previous estimate.
rate for Turkish stocks of 12.5%. Our target price of
TRY23 implies a 59% potential return, above the
Neutral band of our model. Hence we maintain our
Overweight rating on Halkbank.
Currently trading at a 2013e PE of 6.7x and PBV
of 1.3x, with an expected ROAE of 20%,
Halkbank stands at a 17% discount to the sector
average PE and in line with Garanti Bank’s PBV
despite Garanti’s lower ROAE.
For next year, we are looking for a 19bps fall in
the NIM, to 4.16%, resulting in 10% NII growth.
With revenue growth of 8%, we look for 8% net
income growth also in 2014. Our 2014 net income
estimate is now TRY2.87bn, 1% higher than
consensus, and implying an 18.7% ROAE.
Valuation
assumption for Halkbank to 13.3% from the
previous 11.5%) and lower earnings estimates result
in a downward revision of 19% in our residual
income DCF-driven target price for Halkbank.
Under our research model, for non-volatile stocks,
the Neutral band is 5pp above and below the hurdle
Halkbank: summary financials and forecast changes
______ New estimates (TRY) ______ __________y-o-y growth ___________
2012
2013e
2014e
2012
2013e
2014e
____ New vs. old _____
2013e
2014e
NII
Total revenues*
Total provisions*
Operating expenses
Net income
4,476
6,146
584
2,098
2,595
4,846
6,620
660
2,561
2,646
5,326
7,177
774
2,819
2,867
29%
29%
158%
22%
27%
8%
8%
13%
22%
2%
10%
8%
17%
10%
8%
1%
1%
17%
0%
-2%
4%
3%
11%
0%
4%
NIM
NPL ratio**
ROAE
4.75%
2.9%
0.35%
24.8%
4.34%
2.9%
0.49%
20.0%
4.16%
3.1%
0.55%
18.7%
39bps
1bps
48bps
-71bps
-40bps
2bps
13bps
-484bps
-19bps
18bps
6bps
-127bps
1bps
3bps
9bps
-10bps
11bps
10bps
7bps
105bps
Source: Company data, HSBC estimates Note: *adjusted for NPL recoveries Note:** adjusted for write-offs
81
abc
Commercial Banks
MENA and Turkey
17 July 2013
Isbank
 Isbank once again posted a positive earnings surprise in Q1 2013,
confirming management's focus on sustainable profitability
 On our new 2013 net income estimate of TRY3.08bn, which is 7%
lower than consensus, the stock is trading on a 2013 PE of 7.0x –
an undemanding PE multiple among the Turkish large-cap banks
 We lower our target price to TRY6.2 from TRY9.3, owing to lower
forecasts and a higher RfR of 7%; we maintain the stock at
Overweight
The largest private bank in Turkey
Isbank is Turkey’s largest private bank in terms of
total assets, TRY loans, FX loans, consumer loans,
TRY deposits, FX deposits, demand deposits and
branch network. This size brings many advantages
to the bank, although it has not fully capitalised on
these until the past few years.
Positive earnings surprises for the
last six quarters
Isbank’s CRM and IT investments have started to
pay off, as the bank’s focus on profitability has
begun to filter through to its results in the last six
quarters, each of which has been a positive surprise.
In addition, before Q4 2011, the bank’s disclosure
was not as investor-friendly as that of its peers; it did
not, for example, hold post-results conference calls.
This improved disclosure has contributed to the rerating of the stock. The strong earnings growth,
coupled with the re-rating, has resulted in Isbank
being one of the best-performing Turkish banking
sector stocks. not only in 2012 but also since the
beginning of this year.
82
Stock still trading at undemanding
multiples
However, on our new estimates, Isbank is still
trading at a 2013e PE of only 7.0x (versus the
sector average of 8.0x) and a PBV of only 1.0x
(one of the lowest among the peer group).
Pension fund deficit is critical
The bank’s personnel pension fund is running a
deficit of TRY1.78bn, which is fully provisioned.
The latest actuarial calculation was made using a
technical interest rate of 9.8% (set by the existing
regulation), which is significantly higher than the
current market rate. Currently, by law, the plan is to
transfer the pension fund to the Social Security
Institution by May 2014. If the technical interest
rate is reduced ahead of the transfer, that may result
in an increased pension fund deficit, which would
require further provisioning by the bank. This is a
therefore a key risk to the investment story.
abc
Commercial Banks
MENA and Turkey
17 July 2013
Financials
We have revised our estimates for Isbank to
reflect the recent rise in interest rates. Among the
Turkish banks under our coverage, Isbank’s
balance sheet structure is averagely positioned
banks in the face of rising interest rates. However
the bank’s book value is highly exposed to markto-market losses during market downturns due to
its sizeable listed participation portfolio.
We now look for a NIM of 3.83% in 2013, 17bp
lower than we were previously estimating, and
implying a 2bp y-o-y fall. In addition, we increase
our CoR assumption by 23bps, resulting in a 31%
higher total provisioning expense. As a result of
those changes, we now forecast net income of
TRY3.07bn in 2013, down 7% y-o-y. We are now
7% lower than Bloomberg consensus and 14%
lower than our previous estimate.
33% in our residual income DCF-driven target
price for Isbank. Our new target price is TRY6.2
(versus the previous TRY9.2), which implies a
24% potential return, which is above the Neutral
band of our model. Hence, we maintain our
Overweight rating on Isbank.
Isbank is one of the cheaper Turkish banks on a
multiples comparison.
For 2014, on the other hand, we have increased our
NIM forecast by 4bp, to 3.73%, implying a 10bp yo-y fall. Our net income forecast is TRY3.43bn,
down 3% y-o-y. That is in line with Bloomberg
consensus, but 3% lower than our previous estimate.
Valuation
assumption for Isbank to 13.1% from the previous
10.6%), lower earnings estimates, and downward
revisions to the book value due to mark-to-market
losses have resulted in a downward revision of
Isbank: summary financials and forecast changes
_____ New estimates (TRY) ______
2012
2013e
2014e
NII
Total revenues*
Total provisions*
Operating expenses
Net income
NIM
NPL ratio**
ROAE
__________y-o-y growth ___________
2012
2013e
2014e
____ New vs. old _____
2013e
2014e
5,928
9,128
523
4,044
3,310
6,579
9,824
1,374
4,474
3,074
7,241
10,697
1,369
4,934
3,428
30%
24%
-15%
16%
24%
11%
8%
163%
11%
-7%
10%
9%
0%
10%
12%
-4%
-3%
31%
0%
-14%
1%
0%
13%
0%
-3%
3.85%
1.9%
-0.04%
16.5%
3.83%
2.1%
0.67%
13.3%
3.73%
2.2%
0.55%
13.6%
49bps
-26bps
18bps
133bps
-2bps
22bps
71bps
-318bps
-10bps
9bps
-12bps
32bps
-17bps
23bps
23bps
-157bps
4bps
32bps
10bps
55bps
Source: Company data, HSBC estimates Note: *adjusted for NPL recoveries ** adjusted for write-offs
83
abc
Commercial Banks
MENA and Turkey
17 July 2013
Vakifbank
 The current mix of high risk/high return assets is negative in an
environment of high and rising interest rates
 The low ROAE and Tier-1 ratio are other negatives for the
valuation, yet the risk of a potential overhang due to a secondary
offering is now much lower due to unfavourable market conditions
 However, despite a 34% cut to our TP (to TRY5.3 from TRY8.0)
owing to our lower 2013 NI forecast (down 19%) and higher RfR
(to 7% from 5.5%), we upgrade our rating to OW from N. Vakif is a
deep value play
High margins, low asset quality
Vakifbank is trying to increase its profitability by
focusing on the relatively high-risk and high-return
areas of SME and consumer loans. In 2012, the
bank’s non-retail TRY loans (mainly SME and
commercial) grew by 51% y-o-y versus 24%
growth for the sector, on top of 42% growth in total
consumer loans in 2011 versus 30% growth for the
sector. The strategy has had a positive impact on
margins but a negative effect on asset quality, and
we believe it is quite a risky strategy to be
undertaking during a period of rising interest rates.
The bank was among the major beneficiaries of
the declining interest rate trend in Turkey, hence,
conversely, it will be hurt the most in a rising
interest rate environment. During declining
interest rate periods, although the bank’s fixedrate TRY retail-loan-heavy balance sheet was still
generating relatively high returns, the TRY-heavy
deposit base was continuously re-pricing
downwards – resulting in spread and margin
84
expansion. In the coming quarters, however, the
bank will be facing an upward re-pricing upwards
of its TRY-heavy deposit base while it will take
some time to re-price the fixed-rate TRY retailloan-heavy balance sheet upwards.
Low Tier-1 and low sustainable
profitability, but SPO now less likely
Although the Tier-2 debt issued back in Q4 2013
relieved the pressure on banks in terms of capital
strength, Vakifbank is still one of the banks under
our coverage that has a relatively low Tier-1 ratio.
As of Q1 2013, the bank’s Tier-1 ratio stood at
12.3%. ROAE is also still relatively low: 11.7%
2013e and 13.2% 2014.
On the other hand, we now see the risk of a
potential overhang due to a secondary offering as
being much lower due to the unfavourable market
conditions. And, in addition, the valuation levels
are very low: 2013e PE of 6.8x and PBV of 0.8x.
abc
Commercial Banks
MENA and Turkey
17 July 2013
Financials
We see Vakifbank as the least favourably positioned
bank in the face of rising interest rates in Turkey
and this is reflected in our downward earnings
revisions, which are the largest for Vakifabank.
We now look for a NIM of 4.23% in 2013, 23bp
lower than our previous estimate. That implies a
5bp fall in the NIM y-o-y. In terms of asset
quality, we are now more conservative, expecting
a 49bp NPL ratio increase (up by 6bp from
before), implying a 1.17% net CoR, up 51bp y-o-y
and 15bp higher than our previous estimate. We
now look for net income of TRY1.43bn in 2013,
implying a 2% y-o-y fall. That is 14% lower than
Bloomberg consensus and 19% below our
previous estimate.
haircut and implies a potential return of 31%, above
the 7.5-17.5% Neutral band for Turkish stocks.
Therefore, we upgrade Vakifbank to Overweight
from Neutral. Although we see Vafifbank as a deep
value play, it is not one of our preferred stocks
among the Turkish banks.
estimate to TRY1.63bn (9% lower than
consensus), mainly because of a lower NIM (7bp
below our previous forecast, and a 35bp decline
y-o-y).
Valuation
assumption for Vakifbank to 13.3% from the
previous 11.3%) and lower earnings estimates have
resulted in a downward revision of 34% in our
residual income DCF-driven target price for
Vakifbank. Our new target price of TRY5.3, down
from TRY8.0, incorporates a 5% SPO-risk-related
Vakifbank: summary financials and forecast changes
_____ New estimates (TRYm) _____ __________y-o-y growth ___________
2012
2013e
2014e
2012e
2013e
2014e
____ New vs. Old _____
2013e
2014e
NII
Total revenues*
Total provisions*
Operating expenses
Net income
3,907
5,049
860
2,261
1,459
4,486
5,687
1,305
2,536
1,426
4,690
6,037
1,198
2,798
1,633
40%
37%
379%
16%
19%
15%
13%
52%
12%
-2%
5%
6%
-8%
10%
15%
-5%
-4%
12%
0%
-19%
-2%
-2%
10%
0%
-10%
NIM
NPL ratio**
ROAE
4.28%
3.9%
0.66%
13.9%
4.23%
4.4%
1.17%
11.6%
3.88%
4.7%
0.89%
12.2%
71bps
23bps
109bps
25bps
-5bps
49bps
51bps
-233bps
-35bps
31bps
-28bps
56bps
-23bps
6bps
15bps
-229bps
-7bps
14bps
10bps
-63bps
85
abc
Commercial Banks
MENA and Turkey
17 July 2013
Yapi Kredi Bank
 First signs of normalisation in asset quality seen in Q1 results; we
expect this to continue, albeit at a slower pace than originally
forecast
 Valuations dragged down by the relatively low Tier 1, low loan-to-
deposit ratio and low level of ROAE
 2013e net income reduced by 11% on lower NIM and higher
provisioning expenses; RfR increased to 7% from 5.5%; TP
lowered to TRY5.4 from TRY7.0, but rating upgraded to OW from
N on valuation
First signs of asset quality
improvement
Among the large cap Turkish banks, Yapi Kredi
Bank has been the one where we have had most
difficulty explaining the relatively lower asset
quality (as reflected by the historically high level
of the net NPL origination ratio) based on the
balance sheet characteristics of the bank. In the
past five years (2008-12) the real CoR (net NPL
originations/average loans) has averaged 1.56%
for Yapi Kredi versus 0.93% for the sector. We
have always taken a positive view on Yapi Kredi
in this respect, assuming that the real CoR would
converge to sector norms over time, however, we
saw no sign of this up until Q1 2013 when the
bank’s new NPL origination ratio was 1.2% vs
our forecast of 2.0%. We view this a sign that our
convergence theory is correct, although we revise
upwards our CoR estimates for Yapi Kredi in this
note, as we now expect the convergence to take
place more slowly than before.
86
A relatively challenging balance sheet
Yapi Kredi has one of the lowest Tier 1 ratios
among the large cap banks (10.5% on a stand-alone
basis as of March 2013), although the sale of the
insurance subsidiary will have a positive impact of
around 100bp. Yapi Kredi also has one of the
highest loan-to-deposit ratios (110% as at March
2013), and a relatively lower ROAE (13.5% as at
end-2012) resulting in slow internal capital
generation. Despite all these challenges, Yapi Kredi
has been maintaining its market share (and even
making some gains) in selected segments ie retail
loans at 10.4%, mortgages at 8.5%, and general
purpose loans at 6.8%.
Financials
We have revised our estimates for Yapi Kredi
Bank to reflect the recent rise in interest rates.
Among the Turkish banks under our coverage,
Yapi Kredi’s balance sheet structure is slightly
below average in terms of its positioning in the
face of rising interest rates.
abc
Commercial Banks
MENA and Turkey
17 July 2013
We have lowered our 2013 NIM forecast by 18bps
to 3.85% for Yapi Kredi, and have increased our
net CoR assumption by 11bps to 1.02%. These
changes have resulted in a downward revision of
11% in our net income estimate. We now look for
net income of TRY2.03bn, up by 6% y-o-y and
13% lower than the consensus.
indicated.
For 2014, we have kept our net income estimate for
Yapi Kredi, as our NIM and CoR forecast changes
offset each other. Our net income estimate is
TRY2.51bn, implying 23% y-o-y earnings growth
and a 13.2% ROAE. It is 4% lower than consensus.
Valuation
assumption for Yapi Kredi to 13.3% from the
previous 11.6%) and lower earnings estimates have
resulted in a downward revision of 23% in our
residual income DCF-driven target price for Yapi.
Our new target price of TRY5.4, down from
TRY7.0, implies a potential return of 33%, above
the 7.5-17.5% Neutral band for Turkish stocks.
Therefore, we upgrade Yapi Kredi to Overweight
from Neutral.
Yapi Kredi is currently trading at a 2013e PE of
8.5x and PBV of 1.0x, with an expected ROAE of
only 11.7%. In terms of multiples, Yapi Kredi
looks fairly valued compared to Turkish peers.
However, the recent sell-off in Turkish banks, we
believe, provides a good opportunity to invest in
Yapi Kredi in absolute terms.
Yapi Kredi Bank summary financials and forecast changes
_____ New estimates (TRYm) _____ __________y-o-y growth ___________
2012
2013e
2014e
2012
2013e
2014e
____ New vs. old _____
2013e
2014e
NII
Total revenues*
Total provisions*
Operating expenses
Net income
4,417
6,574
1,105
2,993
1,913
4,625
6,987
1,126
3,249
2,035
5,366
7,978
1,245
3,599
2,508
35%
23%
153%
11%
3%
5%
6%
2%
9%
6%
16%
14%
11%
11%
23%
-4%
-3%
12%
0%
-11%
4%
2%
13%
0%
0%
NIM
NPL ratio**
ROAE
4.18%
3.3%
1.08%
13.5%
3.85%
3.3%
1.02%
11.7%
3.94%
3.3%
1.00%
13.2%
57bps
26bps
81bps
-283bps
-32bps
0bps
-6bps
-181bps
8bps
8bps
-1bps
150bps
-18bps
10bps
11bps
-123bps
11bps
27bps
13bps
48bps
87
abc
Commercial Banks
MENA and Turkey
17 July 2013
Valuations and risks
 We value stocks using residual income methodology
 The MENA cost of equity is based on the inflation differential
method due to the currency pegs
 We use a capital asset pricing model to calculate the cost of
equity for Turkish banks
Valuation methodology
We derive our target prices for banks using a
residual income methodology. The residual
income valuation approach calculates the fair
value of the company as the sum of its current net
asset value and the present value of its future
residual income.
The residual income is measured as an excess
return over the cost of equity. Our residual income
valuation methodology for MENA banks
comprises three stages: explicit (2013e-17e),
transition (2018e-28e) and terminal (2029e-43e).
In the first stage, residual income is calculated on
our explicit five-year forecast. In the second, the
maturity phase, we assume a constant growth rate
in net profit and a different payout ratio for each
bank. We assume that the returns converge to the
cost of equity in the terminal phase.
In Turkey we assume a three-year explicit forecast
period but use a higher transition period growth
rate of 12% vs. the 5% in MENA due to lower
visibility. So the model consists of three stages:
the first includes residual income based on an
explicit forecast period (2013e-15e), the second
(maturity/transition stage) assumes a constant
growth rate for net profit (2016e-32e) and the
88
final (declining stage) assumes a convergence of
returns towards the cost of equity (2033e-42e).
Cost of equity and hurdle rate
For GCC and Lebanese banks we use an inflation
differential model to calculate the cost of equity
due to the currency pegs. As Egypt has a managed
exchange rate regime we therefore also use the
inflation differential method to calculate Egyptian
COE. To calculate the cost of equity by the
inflation differential method, we have assumed
the cost of equity to be the sum of the US risk-free
rate (3.5%), and the inflation differential between
the country and the US plus the equity risk
premium multiplied by the stock beta.
In Turkey our cost of equity assumptions
incorporate a 7.0% risk-free rate (up from 5.5%
due to lower TRY interest rates) and a 5.5%
equity risk premium. We use betas of between 1.1
and 1.15. This implies cost of equity of between
13.1% and 13.3% until the end of our valuation
horizon in 2042.
Under our research model, for stocks with/without
a volatility indicator, the Neutral band is 10 [5]
percentage points above and below the hurdle rate
for Saudi, Egypt, Kuwait, Lebanon, Qatar, the
Commercial Banks
MENA and Turkey
17 July 2013
abc
UAE, Oman and Turkey of 8.5%, 12%, 8.5%,
8.5%, 7.5%, 10%, 8% and 12.5% respectively.
indicated.
89
abc
Commercial Banks
MENA and Turkey
17 July 2013
Summary of our cost-of-equity assumptions (Dated 11-07-2013)
CoE
Risk free
Inflation
diff.
MENA banks (Inflation differential method)
ADCB
11.5%
3.5%
2.0%
Al Rajhi**
12.4%
3.5%
3.5%
Alinma
12.6%
3.5%
3.5%
ANB
12.6%
3.5%
3.5%
Bank Audi
13.5%
3.5%
2.0%
Bank
11.5%
3.5%
2.0%
Muscat
Blom
13.5%
3.5%
2.0%
BSF
12.6%
3.5%
3.5%
Burgan
11.5%
3.5%
2.0%
CAE
17.5%
3.5%
8.0%
CBQ
12.3%
3.5%
2.0%
CIB
17.5%
3.5%
8.0%
Doha
12.3%
3.5%
2.0%
FGB
11.5%
3.5%
2.0%
KFH
12.3%
3.5%
2.0%
Masraf
11.5%
3.5%
2.0%
NBAD
11.5%
3.5%
2.0%
NBK
10.7%
3.5%
2.0%
NBO**
11.5%
3.5%
2.0%
QIB
11.5%
3.5%
2.0%
QNB
10.7%
3.5%
2.0%
Riyad
12.6%
3.5%
3.5%
Samba
12.6%
3.5%
3.5%
UNB
11.5%
3.5%
2.0%
Turkish Banks
Akbank
Garanti
Halkbank
IS Bankasi
Vakifbank
YKB
13.1%
13.1%
13.3%
13.1%
13.3%
13.3%
7%
7%
7%
7%
7%
7%
NA
NA
NA
NA
NA
NA
ERP Beta(x) Neutral band
Currency Target price Potential
return*
Rating
6.0%
5.5%
5.7%
5.7%
8.0%
6.0%
1.0
1.0
1.0
1.0
1.0
1.0
5%-15%
3.5%-13.5%
3.5%-13.5%
3.5%-13.5%
3.5%-13.5%
3%-13%
AED
SAR
SAR
SAR
USD
OMR
5.40
77.00
15.60
33.00
6.80
0.72
5%
2%
12%
5%
13%
22%
N
N
N
N
N
OW
8.0%
5.7%
6.0%
6.0%
6.0%
6.0%
6.0%
6.0%
6.0%
6.0%
6.0%
6.0%
6.0%
6.0%
6.0%
5.7%
5.7%
6.0%
1.0
1.0
1.0
1.0
1.1
1.0
1.1
1.0
1.1
1.0
1.0
0.9
1.0
1.0
0.9
1.0
1.0
1.0
3.5%-13.5%
3.5%-13.5%
3.5%-13.5%
7%-17%
2.5%-12.5%
7%-17%
2.5%-12.5%
5%-15%
3.5%-13.5%
2.5%-12.5%
5%-15%
3.5%-13.5%
3%-13%
2.5%-12.5%
2.5%-12.5%
3.5%-13.5%
3.5%-13.5%
5%-15%
USD
SAR
KWD
EGP
QAR
EGP
QAR
AED
KWD
QAR
AED
KWD
OMR
QAR
QAR
SAR
SAR
AED
10.20
38.00
0.67
13.50
75.00
44.00
60.00
17.90
0.64
24.00
12.70
1.02
0.32
75.00
200.00
27.00
67.00
5.20
23%
17%
12%
34%
5%
30%
25%
6%
-6%
-14%
5%
10%
19%
9%
24%
9%
33%
11%
OW
OW
N
OW
N
OW
OW
N
UW
UW
N
N
N
N
OW
N
OW
N
5.5%
5.5%
5.5%
5.5%
5.5%
5.5%
1.10
1.10
1.15
1.10
1.15
1.15
7.5%-17.5%
7.5%-17.5%
7.5%-17.5%
7.5%-17.5%
7.5%-17.5%
7.5%-17.5%
TRY
TRY
TRY
TRY
TRY
TRY
9.30
10.00
23.00
6.20
5.30
5.40
35%
40%
59%
24%
31%
33%
OW
OW
OW
OW
OW
OW
Note: *Potential return equals the percentage difference between the current share price and the target price **Within the Neutral band at the time we set our target price. Our ratings are recalibrated against these bands at the time of any ‘material change’. Expected returns will be permitted to move outside the bands as a result of normal share price fluctuations without necessarily
triggering a rating change.
90
abc
Commercial Banks
MENA and Turkey
17 July 2013
Investment risk factors for the banks and diversified financials under our coverage
Company name Rating Risks to our ratings and estimates
MENA Banks
ANB
N
ADCB
N
Alinma
N
Al Rajhi
N
Bank Audi
N
Bank Muscat
Blom
Burgan
OW
OW
N
BSF
CBQ
OW
N
CIB
OW
CAE
OW
Doha
OW
FGB
N
KFH
UW
Masraf
UW
NBAD
N
NBK
N
NBO
N
QIB
N
QNB
OW
Riyad
N
Samba
OW
UNB
N
Positive risk centres on a strong improvement in the adjusted provision coverage ratio which does not necessitate higher cost of risk in the longer term.
Negative risks include a stronger increase in funding costs than we forecast.
A greater-than-expected increase in non-performing loans in 2013 and 2014 presents a key downside risk. We currently forecast NPLs to stabilise at 5.5-6%
of gross loans. The key upside risk comes from better-than-expected net interest margins. We currently forecast the margin to decline by 44bp by 2015e
The upside risks include a higher-than-expected increase in loan growth in 2013 and 2014 and lower cost of risk than we forecast.
The downside risks centre on a stronger-than-expected deterioration in asset quality and net interest margin.
Upside risks include a more-than-50bp increase in interest rates and lower compression in lending spreads than we forecast. Downside risks centre
on higher-than-expected loan loss provision expenses, negative revisions to the dividend pay-out ratio, and stricter regulation of retail banking fees.
Faster-than-expected profitability generation in Turkey is a key upside risk. A lower-than-expected trading profit during 2013 and 2014 is a key
downside risk.
A lower-than-expected net interest margin, particularly on the retail side, owing to increased competition from new Islamic banks, is the key downside risk.
Potential recapitalisation in Egypt is a key downside risk. Inability to cut deposit rates leading to margin pressure is another downside risk.
A higher-than-expected increase in cost of risk in both Kuwait and Turkey is the key downside risk. A lower-than-expected increase in non interest
expenses (particularly in Turkey) is the key upside risk
Negative risks price centre on a higher-than-expected increase in funding costs and cost of risk.
Higher-than-expected credit growth in the private sector and stabilisation of net interest margins are the key upside risks. The downside risk comes
from higher-than-expected deterioration in asset quality.
Downside risk comes from the large pool of restructured loans, amounting to EGP2.9bn as at the end of Q1 2013. This may lead to a stronger
increase in loan loss provision expenses than we forecast. The restructuring of government EGP securities is another major negative risk.
Key downside risks include capital pressure from the transition to Basel II on higher risk weighting of sovereign debt, currency risks and/or asset
quality headwinds, which may force the bank to cut its payout ratio to below 50%.
A higher-than-expected decline in net interest margins is the key downside risk. An increase in cost of risk, particularly from lending to the SME
segment is another downside risk
Downside risk comes from a greater-than-expected increase in operating costs and declining asset spreads, with a negative effect on pre-provision
income. Upside risk stems from a higher-then-expected increase in loan growth; we currently forecast net loans to grow 9.5% and 10.2% in 2013
and 2014, respectively.
An increase in the pace of collateral collection and higher-than-expected loan loss recoveries could lead to a cost of risk lower than our estimate.
This is the key upside risk.
Faster-than-expected growth in the retail business and refinancing of Govt. Sukuks at a higher interest rate compared to our expectations are the
key upside risks.
A greater-than-expected increase in NPLs in 2013 and 2014 is a key downside risk. We forecast the NPL ratio to increase to 3.9% in 2013 from
3.8% in 2012. Upside risk centres on stronger balance sheet growth and better returns on investment securities than we forecast.
Upside risk comes from better-than-expected loan growth in 2013 should there be a resumption of government spending plans. NBK’s balance sheet size
should enable it to take part in large financing projects. Downside risk comes from higher-than-estimated impairments in both Kuwait and Egypt.
A better-than-expected performance in net interest margins is the key upside risk. Downside risks include lower-than-expected loan loss recoveries
and lower-than-expected retail credit growth.
The rollover of Govt. Sukuks at a higher interest rate relative to our expectations is the key upside risk. Worse-than-expected asset quality
deterioration in both lending activity and the investment portfolio are the key downside risks.
QNB’s acquisition strategy will require additional capital and could also result in integration issues given that QNB has limited experience in
operating in overseas markets. This is a key downside risk for the stock. In addition, withdrawal of foreign funding could leave QNB with a shortterm liquidity gap leading to an increase in cost of funding.
Upside risks centre on a recovery in loan growth above our estimates in 2013 and 2014 as well as a reduction in loan loss provision expenses as a
result of improving asset quality. A medium-term increase in the dividend payout ratio above 70% is also an upside risk.
Downside risks include a reduction in the yield earned on investment securities and an increase in operating costs of more than 7% y-o-y.
Negative risk centres on a reduction in loan spreads and an increase in credit risk above our expectations. A drop in the ratio of demand deposits to
total deposits below 60% would put upward pressure on funding costs, which is also a negative risk.
Higher-than-expected net interest margins is the key upside risk. We currently forecast margins to decline 42bp by 2015. Higher-than-estimated
cost of risk is the key downside risk. We currently estimate average cost of risk of 85bp during 2013-15.
Turkish Banks
Akbank
OW
Garanti
OW
Halkbank
OW
Isbank
OW
Vakifbank
OW
Yapi Kredi
OW
The main downside risk specific to Akbank is a lower-than-expected rise in inflation in 2013 and beyond, as a result of which the bank’s earnings
would be hurt more than those of its peers owing to its sizeable CPI-linker position. In addition, an unsuccessful transformation of the bank into a
more loan-focused institution from its current position of having a security-heavy balance sheet would result in higher asset-quality-related losses.
The main downside risk is further regulatory pressure relating to credit cards.
We see Halkbank’s plans to establish its own credit card brand and loyalty scheme as the key downside risks. The credit card business could hurt
the bank’s asset quality and cost-to-income ratio, which have been among the key drivers of its current success.
The key risk is a potential rise in the bank’s pension fund deficit. However, one must also take into consideration that the bank already has
TRY1.1bn in free provisions, which could offset some, all, or more than the potential additional deficit.
The bank’s earnings are more sensitive to interest rates than those of its peers, so it is subject to more uncertainty than the other large-cap Turkish
banks under our coverage. This leads to both upside and downside risks for the stock. The main downside risk is related to a rapid rise in interest
rates, as the bank’s level of hedging against long-term mortgages is among the lowest in the sector. Another key downside risk would be the
announcement of an earlier-than-expected SPO.
Potential regulatory pressures on fees and commissions is a downside risk, as the share of fee and commissions within total revenues and net
income is the highest for Yapi Kredi.
Source: HSBC
91
abc
Commercial Banks
MENA and Turkey
17 July 2013
Financials & valuation: Abu Dhabi Comm Bank
Year to
P&L summary (AEDm)
Net Interest Income
Non-interest Income
Net fees/commission
Trading profits
Other
Total Operating income
Operating expense
Staff costs
Other oper expenese
PPOP
Provisions
Bad debt
Other
Other non-oper profit(loss)
HSBC PBT
Exceptionals
Profit-before tax
Taxation
PAT
Minorities + pref dividend
Attributable profit
HSBC attributable profit
Balance sheet summary
Total assets
Customer loans (net)
Debt investment assets
Other assets
Total Liabilities
Customer deposits
Debt securities issued
Other liabilities
Total capital
Ordinary equity
Minorities + other capital
IEA (avg)
IBL (avg)
Capital adequacy (%)
RWA (SARm)
Total tier 1
Total Capital
Per share data (AED)
EPS
HSBC EPS (fully diluted)
DPS
NAV (incl intangibles)
NAV (tangible)
ROAA deconstruction (%)
Net interest income
Total interest income
Total interest expense
Net fees & commission
Other income
Operating income
Operating expenses
Staff costs
Other oper exp
PPOP
Provisions
Non-op items
PBT
Taxation
PAT
92
12/2012e
12/2013e
12/2014e
12/2015e
5,207
1,388
940
100
348
6,595
-2,069
-1,165
-905
4,526
-1,691
-1,691
0
-19
2,816
0
2,816
-6
2,810
-315
2,496
2,496
5,124
1,622
992
184
445
6,746
-2,067
-1,188
-879
4,679
-1,625
-1,625
0
-18
3,036
0
3,036
-15
3,021
-316
2,705
2,705
5,124
1,543
1,014
68
460
6,667
-2,085
-1,212
-873
4,582
-1,536
-1,536
0
-11
3,035
0
3,035
-23
3,012
-315
2,697
2,697
5,129
1,545
1,019
49
476
6,674
-2,127
-1,236
-891
4,547
-1,527
-1,527
0
-7
3,013
0
3,013
-30
2,983
-315
2,668
2,668
180,796
123,195
14,466
43,135
160,088
109,217
30,140
20,732
20,708
20,270
438
167,849
148,624
190,891
129,449
16,618
44,824
168,834
115,770
31,615
21,449
21,576
21,576
0
172,910
152,628
200,446
136,231
18,268
45,947
177,132
123,874
30,615
22,643
22,785
22,785
0
182,260
160,723
212,043
144,366
19,538
48,139
187,491
133,784
29,615
24,092
23,970
23,970
0
192,987
169,302
138,390
17.5
23.0
145,899
17.4
21.9
153,824
17.3
21.6
163,203
17.0
21.1
0.45
0.45
0.25
3.62
3.62
0.48
0.48
0.27
3.86
3.86
0.48
0.48
0.27
4.07
4.07
0.48
0.48
0.29
4.28
4.28
2.9
4.3
-1.4
0.5
0.2
3.6
-1.1
-0.6
-0.5
2.5
-0.9
0.0
1.5
0.0
-0.2
1.4
2.8
3.8
-1.0
0.5
0.3
3.6
-1.1
-0.6
-0.5
2.5
-0.9
0.0
1.6
0.0
-0.2
1.5
2.6
3.6
-1.0
0.5
0.3
3.4
-1.1
-0.6
-0.4
2.3
-0.8
0.0
1.6
0.0
-0.2
1.4
2.5
3.7
-1.2
0.5
0.3
3.2
-1.0
-0.6
-0.4
2.2
-0.7
0.0
1.5
0.0
-0.2
1.3
Neutral
Year to
12/2012e
12/2013e
12/2014e
12/2015e
11.1
-9.9
0.3
8.7
-26.0
59.4
69.2
-1.6
16.8
-0.1
3.4
-3.9
7.8
8.4
0.0
-4.9
0.9
-2.1
-5.5
0.0
-0.3
0.1
0.1
2.0
-0.8
-0.6
-0.7
-1.1
-1.3
-1.6
0.6
0.0
5.1
5.6
5.4
6.0
5.2
5.0
5.4
7.0
6.0
5.8
6.1
8.0
3.10
4.66
1.76
2.90
2.96
4.09
1.28
2.81
2.81
3.84
1.16
2.67
2.66
3.99
1.52
2.47
NPL/gross loans
Credit cost
Coverage
NPL/RWA
Provision/RWA
NPL/NTA
Net loans/assets
RWA/assets
Loans/deposits
Avg IEA/avg assets
Avg IBL/avg liabilities
5.4
-1.30
93
5.0
-1.23
34.2
68.1
76.5
112.8
92.1
91.3
5.5
-1.22
97
5.3
-1.14
34.9
67.8
76.4
111.8
93.0
92.8
6.0
-1.09
92
5.8
-1.03
38.0
68.0
76.7
110.0
93.1
92.9
5.5
-1.03
104
5.3
-0.96
35.1
68.1
77.0
107.9
93.6
92.9
Cost/income
Non-int inc/total inc
ROAA (incl goodwill)
ROAE (incl goodwill)
Return on avg tier 1
Leverage (x)
Valuation data
PE (diluted EPS)
P/PPOP
P/BVPS
Dividend yield (%)
P/Deposit
P/Asset
31.4
21.0
1.4
12.9
10.8
9.4
30.6
24.0
1.5
12.7
10.9
8.8
31.3
23.1
1.4
11.9
10.4
8.8
31.9
23.1
1.3
11.1
9.8
8.8
11.6
6.4
1.4
4.8
0.3
0.2
10.7
6.2
1.3
5.2
0.2
0.2
10.7
6.3
1.3
5.1
0.2
0.1
10.8
6.3
1.2
5.5
0.2
0.1
Growth (y-o-y %)
Net interest income
Non-interest income
Operating expense
PPOP
Provisions
PBT
PAT
Net loans
Total assets
RWA
Customer deposits
Ratios (%)
NIM
Gross yield
Cost of funds
Spread
Issuer information
Share price
(AED)
5.16
Reuters (Equity)
ADCB.AD
Market cap (USDm)
7,860
Free float (%)
35
Country
United Arab Emirates
Analyst
Aybek Islamov
Notes: price at close of 11 Jul 2013
Target price
(AED)
Bloomberg (Equity)
Market cap (AEDm)
Sector
Contact
5.40
0
(%) .
0
ADCB UH
28,873
Commercial Banks
+9714 423 6921
abc
Commercial Banks
MENA and Turkey
17 July 2013
Financials & valuation: Alinma Bank
Year to
P&L summary (SARm)
Net Interest Income
Non-interest Income
Net fees/commission
Trading profits
Other
Operating expense
Staff costs
Other oper expenese
PPOP
Provisions
Bad debt
Other
HSBC PBT
Exceptionals
Profit-before tax
Taxation
PAT
Attributable profit
Total assets
Other assets
Total Liabilities
Customer deposits
Other liabilities
Total capital
Ordinary equity
IEA (avg)
IBL (avg)
RWA (SARm)
Total tier 1
Total Capital
Per share data (SAR)
EPS
DPS
NAV (tangible)
Net interest income
Other income
Operating income
Operating expenses
Staff costs
Other oper exp
PPOP
Provisions
Non-op items
PBT
Taxation
PAT
12/2012a
12/2013e
12/2014e
Neutral
12/2015e
1,517
309
243
21
45
1,826
-925
-472
-453
901
-131
-154
24
0
770
0
770
0
770
0
770
770
2,043
353
269
26
58
2,396
-1,027
-529
-498
1,369
-361
-361
0
0
1,008
0
1,008
0
1,008
0
1,008
1,008
2,540
407
311
30
67
2,947
-1,119
-571
-548
1,828
-561
-561
0
0
1,267
0
1,267
0
1,267
0
1,267
1,267
3,108
468
362
33
73
3,576
-1,202
-600
-603
2,373
-584
-584
0
0
1,789
0
1,789
-895
895
1
895
895
54,014
37,187
1,960
14,868
37,350
32,214
0
5,137
16,664
16,664
0
42,511
27,424
77,763
50,848
3,920
22,994
60,090
54,763
0
5,327
17,672
17,672
0
62,614
45,903
97,489
62,001
4,313
31,176
78,549
72,835
0
5,714
18,940
18,940
0
84,009
66,334
109,190
71,547
4,744
32,900
89,893
83,760
0
6,133
19,297
19,297
0
99,432
81,086
51,275
32.4
32.8
68,783
25.6
25.9
83,684
22.6
22.8
95,377
20.2
20.4
0.51
0.51
0.00
11.11
11.11
0.67
0.67
0.00
11.78
11.78
0.84
0.84
0.00
12.63
12.63
0.60
0.60
0.36
12.86
12.86
3.3
3.6
-0.3
0.5
0.1
4.0
-2.0
-1.0
-1.0
2.0
-0.3
0.0
1.7
0.0
0.0
1.7
3.1
3.4
-0.3
0.4
0.1
3.6
-1.6
-0.8
-0.8
2.1
-0.5
0.0
1.5
0.0
0.0
1.5
2.9
3.4
-0.5
0.4
0.1
3.4
-1.3
-0.7
-0.6
2.1
-0.6
0.0
1.4
0.0
0.0
1.4
3.0
3.8
-0.8
0.3
0.1
3.5
-1.2
-0.6
-0.6
2.3
-0.6
0.0
1.7
-0.9
0.0
0.9
Year to
12/2012a
12/2013e
12/2014e
12/2015e
36.5
11.6
11.1
62.0
2.3
79.9
79.9
34.7
14.1
11.0
51.9
175.7
30.9
30.9
24.3
15.5
9.0
33.6
55.5
25.7
25.7
22.3
14.8
7.4
29.8
4.1
41.2
-29.4
47.2
46.8
41.3
81.2
36.7
44.0
34.1
70.0
21.9
25.4
21.7
33.0
15.4
12.0
14.0
15.0
3.57
3.85
0.43
3.42
3.26
3.57
0.41
3.15
3.02
3.53
0.64
2.89
3.13
3.99
1.06
2.93
NPL/gross loans
Credit cost
Coverage
NPL/RWA
Provision/RWA
NPL/NTA
Net loans/assets
RWA/assets
Loans/deposits
Avg IEA/avg assets
0.3
-0.49
167
0.3
-0.30
0.7
68.8
94.9
115.4
93.6
94.2
0.5
-0.81
201
0.5
-0.60
1.6
65.4
88.5
92.8
95.0
94.2
1.1
-0.98
162
0.9
-0.74
3.6
63.6
85.8
85.1
95.9
95.7
1.4
-0.86
163
1.1
-0.65
5.2
65.5
87.3
85.4
96.2
96.3
Cost/income
Leverage (x)
Valuation data
PE (diluted EPS)
P/PPOP
P/BVPS
Dividend yield (%)
P/Deposit
P/Asset
50.7
16.9
1.7
4.7
4.7
2.8
42.9
14.7
1.5
5.9
5.9
3.8
38.0
13.8
1.4
6.9
6.9
4.8
33.6
13.1
0.9
4.7
4.7
5.4
27.2
23.2
1.3
0.0
0.6
0.4
20.8
15.3
1.2
0.0
0.4
0.3
16.5
11.4
1.1
0.0
0.3
0.2
23.4
8.8
1.1
2.6
0.2
0.2
Growth (y-o-y %)
Net interest income
Non-interest income
Operating expense
PPOP
Provisions
PBT
PAT
Net loans
Total assets
RWA
Customer deposits
Ratios (%)
NIM
Gross yield
Cost of funds
Spread
Issuer information
Share price
(SAR)
Reuters (Equity)
Market cap (USDm)
Free float (%)
Country
Analyst
13.95
1150.SE
5,579
70
Saudi Arabia
Aybek Islamov
Target price
(SAR)
Bloomberg (Equity)
Market cap (SARm)
Sector
Contact
15.60
1
(%) 1
.
8
ALINMA AB
20,925
COMMERCIAL BANKS
+9714 423 6921
93
abc
Commercial Banks
MENA and Turkey
17 July 2013
Financials & valuation: Alrajhi Banking & Investm
Year to
P&L summary (SARm)
Net Interest Income
Non-interest Income
Net fees/commission
Trading profits
Other
Operating expense
Staff costs
Other oper expenese
PPOP
Provisions
Bad debt
Other
HSBC PBT
Exceptionals
Profit-before tax
Taxation
PAT
Attributable profit
Total assets
Other assets
Total Liabilities
Customer deposits
Other liabilities
Total capital
Ordinary equity
IEA (avg)
IBL (avg)
RWA (SARm)
Total tier 1
Total Capital
EPS
DPS
NAV (tangible)
Net interest income
Other income
Operating income
Operating expenses
Staff costs
Other oper exp
PPOP
Provisions
Non-op items
PBT
Taxation
PAT
94
12/2012a
12/2013e
12/2014e
12/2015e
9,445
4,538
3,006
0
1,532
13,983
-3,779
-2,103
-1,676
10,204
-2,319
-2,319
0
0
7,885
0
7,885
-850
7,035
0
7,035
7,035
9,757
4,810
3,391
0
1,419
14,567
-4,086
-2,309
-1,776
10,482
-1,877
-1,877
0
0
8,604
0
8,604
-929
7,675
0
7,675
7,675
10,597
5,300
3,812
0
1,488
15,897
-4,380
-2,497
-1,883
11,516
-2,051
-2,051
0
0
9,465
0
9,465
-1,022
8,443
0
8,443
8,443
12,526
5,857
4,304
0
1,553
18,383
-4,749
-2,753
-1,996
13,634
-2,490
-2,490
0
0
11,144
0
11,144
-1,204
9,941
0
9,941
9,941
267,383
171,941
17,381
78,060
234,764
221,343
0
13,421
32,619
32,619
0
235,396
202,014
290,508
201,240
18,181
71,087
255,549
245,691
0
9,858
34,959
34,959
0
267,214
235,785
327,775
231,143
18,984
77,647
290,241
280,087
0
10,154
37,534
37,534
0
293,896
265,225
375,925
266,480
19,840
89,605
335,360
324,901
0
10,458
40,565
40,565
0
335,117
304,901
194,745
14.7
19.8
219,623
14.1
18.6
247,808
13.5
17.6
284,310
12.8
16.4
4.69
4.69
3.25
21.75
21.75
5.12
5.12
3.56
23.31
23.31
5.63
5.63
3.91
25.02
25.02
6.63
6.63
4.61
27.04
27.04
3.9
3.5
0.4
1.2
0.6
5.7
-1.5
-0.9
-0.7
4.2
-1.0
0.0
3.2
-0.3
0.0
2.9
3.7
3.4
0.3
1.2
0.3
5.2
-1.5
-0.8
-0.6
3.8
-0.7
0.0
3.1
-0.3
0.0
2.8
3.4
3.2
0.2
1.2
0.6
5.1
-1.4
-0.8
-0.6
3.7
-0.7
0.0
3.1
-0.3
0.0
2.7
2.7
2.7
0.1
1.2
1.3
5.2
-1.3
-0.8
-0.6
3.9
-0.7
0.0
3.2
-0.3
0.0
2.8
Neutral
Year to
12/2012a
12/2013e
12/2014e
12/2015e
4.6
30.6
8.6
13.1
41.0
6.9
6.1
3.3
6.0
8.1
2.7
-19.0
9.1
9.1
8.6
10.2
7.2
9.9
9.2
10.0
10.0
18.2
10.5
8.4
18.4
21.4
17.7
17.7
Growth (y-o-y %)
Net interest income
Non-interest income
Operating expense
PPOP
Provisions
PBT
PAT
Net loans
Total assets
RWA
Customer deposits
Ratios (%)
NIM
Gross yield
Cost of funds
Spread
22.5
21.1
12.6
24.5
17.0
8.6
12.8
11.0
14.9
12.8
12.8
14.0
15.3
14.7
14.7
16.0
4.01
4.16
0.17
3.99
3.65
3.87
0.25
3.62
3.61
3.90
0.32
3.57
3.74
4.13
0.43
3.70
NPL/gross loans
Credit cost
Coverage
NPL/RWA
Provision/RWA
NPL/NTA
Net loans/assets
RWA/assets
Loans/deposits
Avg IEA/avg assets
2.0
-1.42
137
1.9
-1.26
10.8
64.3
72.8
77.7
96.5
94.9
1.7
-0.97
151
1.7
-0.91
10.2
69.3
75.6
81.9
95.8
96.2
1.5
-0.91
159
1.6
-0.88
9.7
70.5
75.6
82.5
95.1
97.2
1.8
-0.96
137
1.9
-0.94
12.4
70.9
75.6
82.0
95.2
97.5
Cost/income
Leverage (x)
Valuation data
PE (diluted EPS)
P/PPOP
P/BVPS
Dividend yield (%)
P/Deposit
P/Asset
27.0
32.5
2.9
22.6
26.0
7.8
28.0
33.0
2.8
22.7
25.8
8.3
27.6
33.3
2.7
23.3
26.2
8.5
25.8
31.9
2.8
25.5
28.4
9.0
16.0
11.1
3.5
4.3
0.5
0.4
14.7
10.8
3.2
4.7
0.5
0.4
13.4
9.8
3.0
5.2
0.4
0.3
11.4
8.3
2.8
6.1
0.3
0.3
Issuer information
Share price
(SAR)
Reuters (Equity)
Market cap (USDm)
Free float (%)
Country
Analyst
75.25
1120.SE
30,094
45
Saudi Arabia
Aybek Islamov
Target price
(SAR)
Bloomberg (Equity)
Market cap (SARm)
Sector
Contact
77.00
0
(%) .
7
RJHI AB
112,875
COMMERCIAL BANKS
+9714 423 6921
abc
Commercial Banks
MENA and Turkey
17 July 2013
Financials & valuation: Arab National Bank
Year to
P&L summary (SARm)
Net Interest Income
Non-interest Income
Net fees/commission
Trading profits
Other
Operating expense
Staff costs
Other oper expenese
PPOP
Provisions
Bad debt
Other
HSBC PBT
Exceptionals
Profit-before tax
Taxation
PAT
Attributable profit
Total assets
Other assets
Total Liabilities
Customer deposits
Other liabilities
Total capital
Ordinary equity
IEA (avg)
IBL (avg)
RWA (SARm)
Total tier 1
Total Capital
EPS
DPS
NAV (tangible)
Net interest income
Other income
Operating income
Operating expenses
Staff costs
Other oper exp
PPOP
Provisions
Non-op items
PBT
Taxation
PAT
12/2012a
12/2013e
12/2014e
12/2015e
3,260
1,496
909
58
530
4,757
-1,892
-1,112
-780
2,865
-494
-522
28
0
2,371
0
2,371
-444
1,927
0
1,927
1,927
3,297
1,737
1,099
81
557
5,034
-2,038
-1,203
-835
2,996
-545
-575
30
0
2,451
0
2,451
-466
1,985
-2
1,983
1,983
3,752
1,773
1,259
0
514
5,525
-2,157
-1,264
-894
3,368
-647
-679
32
0
2,721
0
2,721
-517
2,204
-3
2,201
2,201
4,757
1,982
1,442
0
540
6,739
-2,296
-1,340
-956
4,443
-1,144
-1,178
34
0
3,299
0
3,299
-627
2,673
-3
2,669
2,669
136,639
86,329
24,323
25,988
119,685
107,560
1,688
10,437
16,954
16,954
0
123,458
107,084
149,824
98,449
22,388
28,987
131,742
120,468
1,688
9,587
18,079
18,079
0
139,692
122,251
169,146
111,967
24,618
32,561
149,812
138,538
1,688
9,587
19,324
19,324
0
155,845
137,740
187,288
127,575
27,077
32,636
166,437
155,162
1,688
9,587
21,151
21,151
0
174,473
155,088
122,239
13.8
14.8
130,027
14.0
14.9
146,782
13.2
14.1
165,706
12.6
13.4
2.26
2.26
1.00
19.91
19.91
2.33
2.33
1.01
21.23
21.23
2.58
2.58
1.12
22.69
22.69
3.13
3.13
1.36
24.84
24.84
6.2
4.3
2.0
0.7
-3.2
3.7
-1.5
-0.9
-0.6
2.3
-0.4
0.0
1.9
-0.3
0.0
1.5
5.5
3.9
1.6
0.8
-2.8
3.5
-1.4
-0.8
-0.6
2.1
-0.4
0.0
1.7
-0.3
0.0
1.4
3.1
2.7
0.5
0.8
-0.5
3.5
-1.4
-0.8
-0.6
2.1
-0.4
0.0
1.7
-0.3
0.0
1.4
2.1
1.9
0.2
0.8
0.9
3.8
-1.3
-0.8
-0.5
2.5
-0.6
0.0
1.9
-0.4
0.0
1.5
Neutral
Year to
12/2012a
12/2013e
12/2014e
12/2015e
2.5
10.0
6.6
3.6
-17.1
9.2
10.8
1.1
16.1
7.7
4.6
10.4
3.4
2.9
13.8
2.1
5.8
12.4
18.8
11.0
11.0
26.8
11.8
6.4
31.9
76.7
21.3
21.3
Net loans
Total assets
RWA
Customer deposits
Ratios (%)
NIM
Gross yield
Cost of funds
Spread
18.5
16.2
17.1
22.4
14.0
9.6
6.4
12.0
13.7
12.9
12.9
15.0
13.9
10.7
12.9
12.0
2.64
3.04
0.46
2.58
2.36
2.92
0.64
2.28
2.41
3.15
0.85
2.31
2.73
3.80
1.20
2.59
NPL/gross loans
Credit cost
Coverage
NPL/RWA
Provision/RWA
NPL/NTA
Net loans/assets
RWA/assets
Loans/deposits
Avg IEA/avg assets
1.5
-0.63
205
1.2
-0.44
7.8
63.2
89.5
80.3
97.1
96.7
1.4
-0.60
195
1.1
-0.43
7.9
65.7
86.8
81.7
97.5
97.2
1.4
-0.63
179
1.2
-0.47
8.4
66.2
86.8
80.8
97.7
97.8
1.4
-0.96
194
1.2
-0.73
8.7
68.1
88.5
82.2
97.9
98.1
Cost/income
Leverage (x)
Valuation data
PE (diluted EPS)
P/PPOP
P/BVPS
Dividend yield (%)
P/Deposit
P/Asset
39.8
31.5
1.5
11.8
11.9
7.8
40.5
34.5
1.4
11.3
11.3
8.2
39.0
32.1
1.4
11.8
11.7
8.5
34.1
29.4
1.5
13.3
13.2
8.8
13.8
9.3
1.6
3.2
0.2
0.2
13.4
8.9
1.5
3.2
0.2
0.2
12.1
7.9
1.4
3.6
0.2
0.2
10.0
6.0
1.3
4.3
0.2
0.1
Growth (y-o-y %)
Net interest income
Non-interest income
Operating expense
PPOP
Provisions
PBT
PAT
Issuer information
Share price
(SAR)
Reuters (Equity)
Market cap (USDm)
Free float (%)
Country
Analyst
31.30
1080.SE
7,093
34
Saudi Arabia
Aybek Islamov
Target price
(SAR)
Bloomberg (Equity)
Market cap (SARm)
Sector
Contact
33.00
4
(%) .
1
ARNB AB
26,605
COMMERCIAL BANKS
+9714 423 6921
95
abc
Commercial Banks
MENA and Turkey
17 July 2013
Financials & valuation: Bank Audi
Year to
P&L summary (LBPm)
Net Interest Income
Non-interest Income
Net fees/commission
Trading profits
Other
Operating expense
Staff costs
Other oper expenese
PPOP
Provisions
Bad debt
Other
HSBC PBT
Exceptionals
Profit-before tax
Taxation
PAT
Attributable profit
Total assets
Other assets
Total Liabilities
Customer deposits
Other liabilities
Total capital
Ordinary equity
IEA (avg)
IBL (avg)
RWA (LBPm)
Total tier 1
Total Capital
Per share data (LBP)
EPS
DPS
NAV (tangible)
Net interest income
Other income
Operating income
Operating expenses
Staff costs
Other oper exp
PPOP
Provisions
Non-op items
PBT
Taxation
PAT
96
12/2012a
12/2013e
863,690
795,129
279,365
323,869
191,895
1,658,819
-757,456
-411,746
-345,710
901,363
-182,585
-182,585
0
-20,617
698,161
850
699,011
-154,537
544,474
-48,011
496,463
495,613
929,094
715,515
300,125
259,095
156,295
1,644,609
-868,411
-447,739
-420,671
776,199
-111,938
-111,938
0
551
664,812
0
664,812
-146,259
518,554
-45,326
473,228
473,228
47,187,469
15,720,914
15,007,551
16,459,004
43,151,277
40,407,991
0
2,743,286
4,036,192
3,336,354
699,838
43,525,290
40,458,610
53,596,975
20,455,829
15,757,929
17,383,217
49,287,378
46,469,190
0
2,818,188
4,309,597
3,599,388
710,209
48,457,527
45,424,359
12/2014e
Neutral
12/2015e
1,038,485 1,147,497
716,649
762,791
324,580
360,079
233,186
233,186
158,883
169,526
1,755,134 1,910,288
-961,910 -1,061,321
-485,535 -521,012
-476,375 -540,309
793,224
848,967
-136,661 -157,793
-136,661 -157,793
0
0
551
551
657,114
691,725
0
0
657,114
691,725
-144,565 -152,180
512,549
539,546
-45,206
-45,746
467,343
493,800
467,343
493,800
59,544,686
23,673,518
16,545,825
19,325,343
54,946,786
52,045,492
0
2,901,294
4,597,899
3,877,439
720,460
54,237,156
51,243,110
66,200,035
27,165,332
17,373,116
21,661,587
61,284,482
58,290,951
0
2,993,531
4,915,553
4,184,302
731,251
60,198,592
57,153,991
28,575,683 32,862,035 36,148,239 39,763,063
11.6
10.9
10.7
10.5
11.8
11.3
11.1
11.0
1,431
1,428
601
9,539
8,760
1,364
1,364
541
10,291
9,512
1,347
1,347
534
11,086
10,307
1,423
1,423
565
11,964
11,185
1.9
4.9
-3.0
0.6
1.1
3.7
-1.7
-0.9
-0.8
2.0
-0.4
0.0
1.5
-0.3
-0.1
1.1
1.8
4.9
-3.1
0.6
0.8
3.3
-1.7
-0.9
-0.8
1.5
-0.2
0.0
1.3
-0.3
-0.1
0.9
1.8
5.0
-3.1
0.6
0.7
3.1
-1.7
-0.9
-0.8
1.4
-0.2
0.0
1.2
-0.3
-0.1
0.8
1.8
4.9
-3.1
0.6
0.6
3.0
-1.7
-0.8
-0.9
1.4
-0.3
0.0
1.1
-0.2
-0.1
0.8
Year to
12/2012a
12/2013e
12/2014e
12/2015e
9.6
14.5
13.2
10.8
32.6
2.6
-2.9
7.6
-10.0
14.6
-13.9
-38.7
-4.8
-4.5
11.8
0.2
10.8
2.2
22.1
-1.2
-1.2
10.5
6.4
10.3
7.0
15.5
5.3
5.7
Net loans
Total assets
RWA
Customer deposits
Ratios (%)
NIM
Gross yield
Cost of funds
Spread
21.3
8.9
4.5
8.1
30.1
13.6
15.0
15.0
15.7
11.1
10.0
12.0
14.7
11.2
10.0
12.0
1.98
5.07
3.32
1.75
1.92
5.11
3.41
1.70
1.91
5.18
3.46
1.72
1.91
5.16
3.43
1.73
NPL/gross loans
Credit cost
Coverage
NPL/RWA
Provision/RWA
NPL/NTA
Net loans/assets
RWA/assets
Loans/deposits
Avg IEA/avg assets
2.7
-1.23
115
1.6
-0.65
14.4
33.3
60.6
38.9
96.2
97.6
2.7
-0.60
112
1.9
-0.36
17.2
38.2
61.3
44.0
96.2
98.3
2.9
-0.60
111
2.1
-0.40
19.9
39.8
60.7
45.5
95.9
98.3
3.2
-0.60
109
2.3
-0.42
22.9
41.0
60.1
46.6
95.7
98.3
Cost/income
Leverage (x)
Valuation data
PE (diluted EPS)
P/PPOP
P/BVPS
Dividend yield (%)
P/Deposit
P/Asset
45.7
47.9
1.1
15.0
16.1
11.9
52.8
43.5
0.9
13.3
13.7
12.1
54.8
40.8
0.8
12.1
12.5
12.7
55.6
39.9
0.8
11.9
12.3
13.2
6.4
3.5
1.0
6.6
0.1
0.1
6.7
4.1
1.0
6.0
0.1
0.1
6.7
4.0
0.9
5.9
0.1
0.1
6.4
3.7
0.8
6.2
0.1
0.0
Growth (y-o-y %)
Net interest income
Non-interest income
Operating expense
PPOP
Provisions
PBT
PAT
Issuer information
Share price
(USD)
6.00
Reuters (Equity)
AUDI.BY
Market cap (USDm)
2,098
Free float (%)
31
Country
Lebanon
Analyst
Vikram Viswanathan
Target price
(USD)
Bloomberg (Equity)
Market cap (USDm)
Sector
Contact
6.80
1
(%) 8
.
0
AUDI LB
2,098
Commercial Banks
+971 4 423 6931
abc
Commercial Banks
MENA and Turkey
17 July 2013
Financials & valuation: Bank Muscat
Year to
P&L summary (OMRm)
Net Interest Income
Non-interest Income
Net fees/commission
Trading profits
Other
Operating expense
Staff costs
Other oper expenese
PPOP
Provisions
Bad debt
Other
HSBC PBT
Exceptionals
Profit-before tax
Taxation
PAT
Attributable profit
Total assets
Other assets
Total Liabilities
Customer deposits
Other liabilities
Total capital
Ordinary equity
IEA (avg)
IBL (avg)
RWA (QMRm)
Total tier 1
Total Capital
Per share data (OMR)
EPS
DPS
NAV (tangible)
Net interest income
Other income
Operating income
Operating expenses
Staff costs
Other oper exp
PPOP
Provisions
Non-op items
PBT
Taxation
PAT
12/2012a
12/2013e
12/2014e
Overweight
12/2015e
230
93
72
2
19
324
-135
-74
-60
189
-25
-24
-1
-7
157
0
157
-18
139
0
139
139
246
103
77
5
21
348
-150
-84
-66
199
-18
-18
0
-3
177
-15
162
-25
138
0
138
153
267
113
85
5
23
380
-164
-93
-71
216
-21
-21
0
-2
194
0
194
-27
166
0
166
166
300
125
95
5
25
425
-178
-100
-77
247
-31
-31
0
-1
215
0
215
-30
185
0
185
185
7,914
5,601
520
1,792
6,841
5,324
315
1,203
1,072
1,072
0
7,142
6,210
9,013
6,254
557
2,202
7,748
5,944
507
1,298
1,265
1,265
0
7,985
6,886
9,988
7,053
597
2,337
8,607
6,699
507
1,401
1,380
1,380
0
8,972
7,749
11,143
8,006
640
2,497
9,644
7,605
507
1,532
1,499
1,499
0
10,090
8,676
7,593
13.3
17.0
8,476
13.8
17.6
9,554
13.5
16.8
10,846
12.8
15.9
0.07
0.07
0.02
0.53
0.53
0.06
0.07
0.02
0.59
0.59
0.07
0.07
0.03
0.63
0.63
0.08
0.08
0.04
0.69
0.69
3.0
4.2
-1.2
1.0
0.3
4.3
-1.8
-1.0
-0.8
2.5
-0.3
-0.1
2.1
-0.2
0.0
1.8
2.9
4.0
-1.1
0.9
0.3
4.1
-1.8
-1.0
-0.8
2.3
-0.2
0.0
2.1
-0.3
0.0
1.8
2.8
3.9
-1.1
0.9
0.3
4.0
-1.7
-1.0
-0.8
2.3
-0.2
0.0
2.0
-0.3
0.0
1.8
2.8
3.9
-1.1
0.9
0.3
4.0
-1.7
-0.9
-0.7
2.3
-0.3
0.0
2.0
-0.3
0.0
1.8
Year to
12/2012a
12/2013e
12/2014e
12/2015e
8.6
13.5
11.3
9.1
-19.1
15.1
18.4
6.6
10.3
11.2
5.1
-26.2
13.2
9.6
8.9
9.7
9.5
8.8
12.2
9.1
9.1
12.1
11.2
8.4
14.4
50.9
11.1
11.1
16.2
9.5
14.3
12.1
11.7
13.9
11.6
11.6
12.8
10.8
12.7
12.7
13.5
11.6
13.5
13.5
3.23
4.49
1.45
3.04
3.08
4.25
1.36
2.89
2.98
4.13
1.33
2.80
2.97
4.10
1.31
2.79
NPL/gross loans
Credit cost
Coverage
NPL/RWA
Provision/RWA
NPL/NTA
Net loans/assets
RWA/assets
Loans/deposits
Avg IEA/avg assets
3.0
-0.46
121
2.4
-0.35
16.9
70.8
95.9
105.2
94.3
94.1
2.8
-0.30
128
2.3
-0.23
13.9
69.4
94.0
105.2
94.3
94.4
2.9
-0.30
124
2.3
-0.23
14.9
70.6
95.7
105.3
94.4
94.8
2.9
-0.40
123
2.4
-0.31
15.8
71.8
97.3
105.3
95.5
95.1
Cost/income
Leverage (x)
Valuation data
PE (diluted EPS)
P/PPOP
P/BVPS
Dividend yield (%)
P/Deposit
P/Asset
41.6
28.8
1.8
14.3
15.8
7.8
43.0
29.5
1.6
11.8
14.0
7.2
43.1
29.7
1.8
12.6
13.5
7.2
41.8
29.5
1.8
12.8
13.8
7.3
8.2
6.1
1.1
4.3
0.2
0.1
8.5
6.6
1.0
4.0
0.2
0.1
7.8
6.0
0.9
5.2
0.2
0.1
7.0
5.3
0.9
6.5
0.2
0.1
Growth (y-o-y %)
Net interest income
Non-interest income
Operating expense
PPOP
Provisions
PBT
PAT
Net loans
Total assets
RWA
Customer deposits
Ratios (%)
NIM
Gross yield
Cost of funds
Spread
Issuer information
Share price
(OMR)
0.59
Reuters (Equity)
BMAO.OM
Market cap (USDm)
3,270
Free float (%)
Country
Oman
Analyst
Vikram Viswanathan
Target price
(OMR)
Bloomberg (Equity)
Market cap (OMRm)
Sector
Contact
0.72
2
(%) 2
.
9
BKM OM
1,259
COMMERCIAL BANKS
+971 4 423 6931
97
abc
Commercial Banks
MENA and Turkey
17 July 2013
Financials & valuation: Banque Saudi Fransi
Year to
P&L summary (SARm)
Net Interest Income
Non-interest Income
Net fees/commission
Trading profits
Other
Operating expense
Staff costs
Other oper expenese
PPOP
Provisions
Bad debt
Other
HSBC PBT
Exceptionals
Profit-before tax
Taxation
PAT
Attributable profit
Total assets
Other assets
Total Liabilities
Customer deposits
Other liabilities
Total capital
Ordinary equity
IEA (avg)
IBL (avg)
RWA (SARm)
Total tier 1
Total Capital
EPS
DPS
NAV (tangible)
Net interest income
Other income
Operating income
Operating expenses
Staff costs
Other oper exp
PPOP
Provisions
Non-op items
PBT
Taxation
PAT
98
12/2012a
12/2013e
12/2014e
12/2015e
3,306
1,704
1,173
138
392
5,010
-1,552
-876
-677
3,457
-442
-455
13
0
3,015
0
3,015
-246
2,769
0
2,769
2,769
3,383
1,772
1,269
150
354
5,155
-1,556
-866
-690
3,599
-525
-532
7
0
3,074
0
3,074
-246
2,828
-2
2,827
2,827
3,833
1,873
1,378
120
375
5,705
-1,623
-912
-711
4,083
-600
-608
7
0
3,483
0
3,483
-279
3,204
-2
3,202
3,202
4,745
1,891
1,497
0
394
6,636
-1,710
-964
-746
4,925
-811
-819
8
0
4,114
0
4,114
-329
3,785
-2
3,783
3,783
157,777
102,785
27,498
27,494
135,090
115,572
8,908
10,610
21,877
21,877
0
142,134
123,200
180,016
115,708
26,522
37,786
155,895
136,375
8,908
10,612
24,121
24,121
0
161,411
140,544
201,652
130,737
25,604
45,310
174,989
155,467
8,908
10,614
26,663
26,663
0
182,719
160,492
225,415
148,193
24,743
52,479
195,748
176,224
8,908
10,616
29,667
29,667
0
204,839
180,416
152,512
14.7
16.5
159,993
15.1
16.8
183,391
14.5
16.1
210,076
14.1
15.5
3.06
3.06
0.62
24.20
24.20
3.13
3.13
0.65
26.68
26.68
3.54
3.54
0.73
29.49
29.49
4.18
4.18
0.86
32.82
32.82
5.1
3.3
1.8
0.8
-2.5
3.4
-1.0
-0.6
-0.5
2.3
-0.3
0.0
2.0
-0.2
0.0
1.9
4.6
3.1
1.5
0.8
-2.3
3.1
-0.9
-0.5
-0.4
2.1
-0.3
0.0
1.8
-0.1
0.0
1.7
2.7
2.1
0.5
0.7
-0.4
3.0
-0.9
-0.5
-0.4
2.1
-0.3
0.0
1.8
-0.1
0.0
1.7
1.9
1.7
0.2
0.7
0.5
3.1
-0.8
-0.5
-0.3
2.3
-0.4
0.0
1.9
-0.2
0.0
1.8
Overweight
Year to
12/2012a
12/2013e
12/2014e
12/2015e
5.4
17.7
3.5
12.1
153.7
3.6
3.6
2.3
4.0
0.3
4.1
18.6
2.0
2.1
13.3
5.7
4.2
13.5
14.5
13.3
13.3
23.8
1.0
5.4
20.6
35.1
18.1
18.1
Net loans
Total assets
RWA
Customer deposits
Ratios (%)
NIM
Gross yield
Cost of funds
Spread
11.3
12.3
10.1
5.1
12.6
14.1
4.9
18.0
13.0
12.0
14.6
14.0
13.4
11.8
14.6
13.4
2.33
2.86
0.62
2.24
2.10
2.67
0.66
2.01
2.10
2.91
0.93
1.98
2.32
3.59
1.44
2.14
NPL/gross loans
Credit cost
Coverage
NPL/RWA
Provision/RWA
NPL/NTA
Net loans/assets
RWA/assets
Loans/deposits
Avg IEA/avg assets
1.0
-0.46
149
0.7
-0.30
4.8
65.1
96.7
88.9
95.3
96.3
1.2
-0.48
136
0.9
-0.34
5.7
64.3
88.9
84.8
95.6
96.6
1.2
-0.49
137
0.9
-0.35
6.1
64.8
90.9
84.1
95.7
97.0
1.4
-0.58
127
1.0
-0.41
6.9
65.7
93.2
84.1
95.9
97.3
Cost/income
Leverage (x)
Valuation data
PE (diluted EPS)
P/PPOP
P/BVPS
Dividend yield (%)
P/Deposit
P/Asset
31.0
34.0
1.9
13.3
13.3
7.2
30.2
34.4
1.7
12.3
12.2
7.3
28.4
32.8
1.7
12.6
12.6
7.5
25.8
28.5
1.8
13.4
13.4
7.6
10.6
8.5
1.3
1.9
0.3
0.2
10.4
8.2
1.2
2.0
0.2
0.2
9.2
7.2
1.1
2.2
0.2
0.1
7.8
6.0
1.0
2.7
0.2
0.1
Growth (y-o-y %)
Net interest income
Non-interest income
Operating expense
PPOP
Provisions
PBT
PAT
Issuer information
Share price
(SAR)
Reuters (Equity)
Market cap (USDm)
Free float (%)
Country
Analyst
32.60
1050.SE
7,857
40
Saudi Arabia
Aybek Islamov
Target price
(SAR)
Bloomberg (Equity)
Market cap (SARm)
Sector
Contact
38.00
1
(%) 1
.
8
BSFR AB
29,470
COMMERCIAL BANKS
+9714 423 6921
abc
Commercial Banks
MENA and Turkey
17 July 2013
Financials & valuation: Blom Bank
Year to
P&L summary (LBPm)
Net Interest Income
Non-interest Income
Net fees/commission
Trading profits
Other
Operating expense
Staff costs
Other oper expense
PPOP
Provisions
Bad debt
Other
HSBC PBT
Exceptionals
Profit-before tax
Taxation
PAT
Attributable profit
Total assets
Other assets
Total Liabilities
Customer deposits
Other liabilities
Total capital
Ordinary equity
IEA (avg)
IBL (avg)
RWA (LBPm)
Total tier 1
Total Capital
Per share data (LBP)
EPS
DPS
NAV (tangible)
Net interest income
Other income
Operating income
Operating expenses
Staff costs
Other oper exp
PPOP
Provisions
Non-op items
PBT
Taxation
PAT
12/2012a
12/2013e
12/2014e
Overweight
12/2015e
787,964
407,781
169,368
193,976
44,437
1,195,745
-432,942
-247,485
-185,457
762,803
-154,611
-154,611
0
0
608,192
0
608,192
-104,366
503,826
-25,996
477,830
477,830
801,838
321,381
177,836
116,637
26,907
1,123,219
-452,515
-259,859
-192,656
670,704
-80,165
-80,165
0
0
590,539
0
590,539
-106,297
484,242
-25,784
458,458
458,458
827,056
380,859
190,285
163,328
27,247
1,207,915
-482,480
-278,049
-204,431
725,435
-73,872
-73,872
0
0
651,562
0
651,562
-117,281
534,281
-26,278
508,003
508,003
921,491
413,587
209,313
171,652
32,622
1,335,078
-520,561
-300,293
-220,268
814,517
-80,544
-80,544
0
0
733,973
0
733,973
-132,115
601,858
-26,946
574,912
574,912
37,710,910
9,085,430
15,102,425
13,523,055
34,422,591
32,758,676
0
1,663,915
3,288,319
2,893,490
394,829
35,541,912
32,135,009
40,303,271
9,721,410
15,851,290
14,730,571
36,696,418
35,379,370
0
1,317,048
3,606,853
3,208,040
398,813
37,437,910
34,547,062
43,564,852
10,499,123
16,660,890
16,404,839
39,582,255
38,209,720
0
1,372,535
3,982,597
3,578,505
404,092
39,178,628
37,131,933
46,736,918
11,759,018
17,512,162
17,465,738
42,325,864
40,884,400
0
1,441,464
4,411,054
4,001,016
410,038
41,851,039
39,884,448
22,120,019 23,889,620 25,800,790 28,896,885
13.2
13.6
13.9
13.8
13.4
13.8
14.3
14.3
2,222
2,222
669
13,458
13,160
2,132
2,132
640
14,921
14,623
2,363
2,363
709
16,644
16,346
2,674
2,674
802
18,609
18,311
2.2
5.4
-3.2
0.5
0.7
3.3
-1.2
-0.7
-0.5
2.1
-0.4
0.0
1.7
-0.3
-0.1
1.3
2.1
5.2
-3.1
0.5
0.4
2.9
-1.2
-0.7
-0.5
1.7
-0.2
0.0
1.5
-0.3
-0.1
1.2
2.0
5.4
-3.4
0.5
0.5
2.9
-1.2
-0.7
-0.5
1.7
-0.2
0.0
1.6
-0.3
-0.1
1.2
2.0
5.7
-3.7
0.5
0.5
3.0
-1.2
-0.7
-0.5
1.8
-0.2
0.0
1.6
-0.3
-0.1
1.3
Year to
12/2012a
12/2013e
12/2014e
12/2015e
1.3
28.0
4.0
12.2
158.0
-1.7
2.3
1.8
-21.2
4.5
-12.1
-48.2
-2.9
-4.1
3.1
18.5
6.6
8.2
-7.8
10.3
10.8
11.4
8.6
7.9
12.3
9.0
12.6
13.2
Net loans
Total assets
RWA
Customer deposits
Ratios (%)
NIM
Gross yield
Cost of funds
Spread
7.8
8.0
10.0
7.2
7.0
6.9
8.0
8.0
8.0
8.1
8.0
8.0
12.0
7.3
12.0
7.0
2.22
5.48
3.61
1.87
2.14
5.42
3.55
1.87
2.11
5.74
3.83
1.91
2.20
6.18
4.17
2.01
NPL/gross loans
Credit cost
Coverage
NPL/RWA
Provision/RWA
NPL/NTA
Net loans/assets
RWA/assets
Loans/deposits
Avg IEA/avg assets
5.3
-1.69
100
2.4
-0.73
18.1
24.1
58.7
27.7
97.9
96.9
5.5
-0.81
97
2.4
-0.35
17.9
24.1
59.3
27.5
96.0
97.2
5.6
-0.69
101
2.5
-0.30
17.6
24.1
59.2
27.5
93.4
97.4
5.6
-0.68
103
2.5
-0.29
17.6
25.2
61.8
28.8
92.7
97.4
Cost/income
Leverage (x)
36.2
34.1
1.3
16.8
17.4
11.6
40.3
28.6
1.2
14.6
14.9
11.3
39.9
31.5
1.2
14.5
14.9
11.1
39.0
31.0
1.3
14.8
15.1
10.8
5.6
3.5
1.0
5.3
0.1
0.1
5.9
4.0
0.9
5.1
0.1
0.1
5.3
3.7
0.8
5.6
0.1
0.1
4.7
3.3
0.7
6.4
0.1
0.1
Growth (y-o-y %)
Net interest income
Non-interest income
Operating expense
PPOP
Provisions
PBT
PAT
Valuation data
PE (diluted EPS)
P/PPOP
P/BVPS
Dividend yield (%)
P/Deposit
P/Asset
Issuer information
Share price
(USD)
8.30
Reuters (Equity)
BLOM.BY
Market cap (USDm)
1,785
Free float (%)
54
Country
Lebanon
Analyst
Vikram Viswanathan
Target price
(USD)
Bloomberg (Equity)
Market cap (USDm)
Sector
Contact
10.20
2
(%) 3
.
6
BLOM LB
1,785
COMMERCIAL BANKS
+971 4 423 6931
99
abc
Commercial Banks
MENA and Turkey
17 July 2013
Financials & valuation: Burgan Bank
Year to
P&L summary (KWDm)
Net Interest Income
Non-interest Income
Net fees/commission
Trading profits
Other
Operating expense
Staff costs
Other oper expenese
PPOP
Provisions
Bad debt
Other
HSBC PBT
Exceptionals
Profit-before tax
Taxation
PAT
Attributable profit
Total assets
Other assets
Total Liabilities
Customer deposits
Other liabilities
Total capital
Ordinary equity
IEA (avg)
IBL (avg)
RWA (KWDm)
Total tier 1
Total Capital
Per share data (KWD)
EPS
DPS
NAV (tangible)
Net interest income
Other income
Operating income
Operating expenses
Staff costs
Other oper exp
PPOP
Provisions
Non-op items
PBT
Taxation
PAT
100
12/2012a
12/2013e
12/2014e
Neutral
12/2015e
119
71
38
2
31
190
-71
-32
-39
119
-36
-36
0
-4
79
0
79
-16
63
-7
56
56
152
97
42
9
45
249
-96
-44
-52
153
-41
-41
0
0
112
0
112
-17
94
-9
85
85
168
121
47
16
58
289
-106
-48
-58
183
-50
-50
0
-1
133
0
133
-21
112
-11
101
101
205
141
53
17
71
346
-119
-54
-65
227
-63
-63
0
-3
161
0
161
-25
136
-14
122
122
5,977
3,384
166
2,427
5,357
3,895
231
1,231
443
314
129
4,793
4,498
6,976
4,128
166
2,682
6,277
4,753
231
1,292
522
384
139
5,939
5,606
8,153
5,013
183
2,957
7,367
5,779
231
1,357
609
459
150
7,072
6,600
9,467
5,988
201
3,277
8,575
6,919
231
1,425
715
551
163
8,388
7,738
4,004
12.0
18.5
4,805
11.2
16.9
5,765
10.6
15.5
6,919
9.9
14.2
0.04
0.04
0.01
0.21
0.21
0.05
0.05
0.02
0.25
0.25
0.07
0.07
0.02
0.30
0.30
0.08
0.08
0.03
0.36
0.36
2.3
3.6
-1.4
0.7
0.6
3.6
-1.4
-0.6
-0.7
2.3
-0.7
-0.1
1.5
-0.3
-0.1
1.1
2.3
4.1
-1.8
0.6
0.8
3.8
-1.5
-0.7
-0.8
2.4
-0.6
0.0
1.7
-0.3
-0.1
1.3
2.2
4.0
-1.8
0.6
1.0
3.8
-1.4
-0.6
-0.8
2.4
-0.7
0.0
1.8
-0.3
-0.1
1.3
2.3
4.1
-1.8
0.6
1.0
3.9
-1.3
-0.6
-0.7
2.6
-0.7
0.0
1.8
-0.3
-0.2
1.4
Year to
12/2012a
12/2013e
12/2014e
12/2015e
13.7
21.0
15.9
16.7
23.9
15.4
10.0
27.9
35.9
35.0
28.4
12.6
41.8
52.7
10.2
25.2
10.0
19.8
22.1
18.7
18.7
22.1
16.4
12.0
24.2
26.6
21.3
21.3
50.3
31.3
34.1
39.3
22.0
16.7
20.0
22.0
21.4
16.9
20.0
21.6
19.5
16.1
20.0
19.7
2.48
3.98
1.60
2.38
2.56
4.50
2.05
2.45
2.37
4.27
2.03
2.23
2.44
4.34
2.06
2.28
NPL/gross loans
Credit cost
Coverage
NPL/RWA
Provision/RWA
NPL/NTA
Net loans/assets
RWA/assets
Loans/deposits
Avg IEA/avg assets
6.1%
1.0%
102%
7.1
-1.03
75.7
56.6
67.0
86.9
91.0
96.3
5.9%
0.9%
102%
6.5
-0.92
74.9
59.2
68.9
86.8
91.7
96.4
5.8%
0.9%
102%
6.4
-0.94
73.5
61.5
70.7
86.7
93.5
96.8
5.9%
1.0%
101%
6.4
-0.99
73.5
63.3
73.1
86.5
95.2
97.1
Cost/income
Leverage (x)
Valuation data
PE (diluted EPS)
P/PPOP
P/BVPS
Dividend yield (%)
P/Deposit
P/Asset
37.5
37.4
1.1
18.9
12.1
12.6
38.7
38.9
1.3
24.3
16.7
13.4
36.7
42.0
1.3
23.9
17.5
13.4
34.3
40.8
1.4
24.2
18.9
13.3
16.7
7.8
2.8
1.7
0.2
0.2
10.9
6.1
2.4
2.7
0.2
0.1
9.2
5.1
2.0
3.3
0.2
0.1
7.6
4.1
1.7
5.3
0.1
0.1
Growth (y-o-y %)
Net interest income
Non-interest income
Operating expense
PPOP
Provisions
PBT
PAT
Net loans
Total assets
RWA
Customer deposits
Ratios (%)
NIM
Gross yield
Cost of funds
Spread
Issuer information
Share price
(KWD)
0.60
Reuters (Equity)
BURG.KW
Market cap (USDm)
3,407
Free float (%)
Country
Kuwait
Analyst
Vikram Viswanathan
Target price
(KWD)
Bloomberg (Equity)
Market cap (KWDm)
Sector
Contact
0.67
1
(%) 5
.
3
BURG KK
973
COMMERCIAL BANKS
+971 4 423 6931
abc
Commercial Banks
MENA and Turkey
17 July 2013
Financials & valuation: Credit Agricole Egypt Bank
Year to
P&L summary (EGPm)
Net Interest Income
Non-interest Income
Net fees/commission
Trading profits
Other
Operating expense
Staff costs
Other oper expenses
PPOP
Provisions
Bad debt
Other
HSBC PBT
Exceptionals
Profit-before tax
Taxation
PAT
Attributable profit
Total assets
Other assets
Total Liabilities
Customer deposits
Other liabilities
Total capital
Ordinary equity
IEA (avg)
IBL (avg)
RWA (EGPm)
Total tier 1
Total Capital
Per share data (EGP)
EPS
DPS
NAV (tangible)
Net interest income
Other income
Operating income
Operating expenses
Staff costs
Other oper exp
PPOP
Provisions
Non-op items
PBT
Taxation
PAT
12/2012a
12/2013e
12/2014e
12/2015e
1,019
461
258
64
139
1,481
-712
-343
-368
769
-129
-127
-3
0
595
0
640
-169
471
0
471
426
1,118
438
282
4
152
1,556
-739
-350
-389
817
-138
-134
-4
0
630
0
679
-190
489
0
489
440
1,211
499
326
4
170
1,711
-789
-368
-421
922
-146
-143
-3
0
720
0
776
-217
559
0
559
503
1,340
583
389
4
190
1,923
-854
-397
-456
1,070
-134
-131
-3
0
869
0
936
-262
674
0
674
607
28,112
12,926
7,130
8,056
25,786
22,738
0
3,049
2,326
2,326
0
24,245
23,599
30,730
13,999
7,378
9,352
28,200
25,706
0
2,494
2,530
2,530
0
26,775
25,606
35,069
16,266
7,812
10,991
32,281
29,474
0
2,808
2,787
2,787
0
29,513
28,545
40,408
19,367
8,274
12,767
37,294
34,201
0
3,092
3,114
3,114
0
33,459
32,821
17,299
10.4
11.6
18,957
10.8
11.9
22,079
10.5
11.5
26,037
10.2
11.0
1.64
1.49
0.82
8.10
7.91
1.70
1.53
0.85
8.82
8.62
1.95
1.75
0.98
9.71
9.71
2.35
2.11
1.18
10.85
10.85
3.8
7.8
-4.0
1.0
0.8
5.5
-2.6
-1.3
-1.4
2.9
-0.5
0.0
2.4
-0.6
0.0
1.8
3.8
7.7
-3.9
1.0
0.5
5.3
-2.5
-1.2
-1.3
2.8
-0.5
0.0
2.3
-0.6
0.0
1.7
3.7
7.4
-3.7
1.0
0.5
5.2
-2.4
-1.1
-1.3
2.8
-0.4
0.0
2.4
-0.7
0.0
1.7
3.6
7.3
-3.7
1.0
0.5
5.1
-2.3
-1.1
-1.2
2.8
-0.4
0.0
2.5
-0.7
0.0
1.8
Overweight
Year to
12/2012a
12/2013e
12/2014e
12/2015e
17.2
25.1
11.0
28.9
-7.3
39.0
53.9
9.7
-5.0
3.9
6.2
6.4
5.9
3.2
8.4
14.0
6.7
12.8
5.9
14.2
14.2
10.7
16.7
8.2
16.1
-8.3
20.7
20.7
Net loans
Total assets
RWA
Customer deposits
Ratios (%)
NIM
Gross yield
Cost of funds
Spread
12.7
9.6
18.2
12.0
8.3
9.3
9.6
13.1
16.2
14.1
16.5
14.7
19.1
15.2
17.9
16.0
4.20
8.63
4.54
4.08
4.18
8.50
4.52
3.98
4.10
8.26
4.30
3.96
4.01
8.23
4.30
3.92
NPL/gross loans
Credit cost
Coverage
NPL/RWA
Provision/RWA
NPL/NTA
Net loans/assets
RWA/assets
Loans/deposits
Avg IEA/avg assets
2.0
-1.02
199
1.7
-0.81
11.8
46.0
61.5
56.8
90.2
95.5
2.4
-0.98
190
1.9
-0.76
14.2
45.6
61.7
54.5
91.0
94.9
3.2
-0.92
150
2.7
-0.71
19.7
46.4
63.0
55.2
89.7
94.4
3.5
-0.71
136
3.0
-0.56
22.8
47.9
64.4
56.6
88.7
94.3
Cost/income
Leverage (x)
Valuation data
PE (diluted EPS)
P/PPOP
P/BVPS
Dividend yield (%)
P/Deposit
P/Asset
48.1
31.2
1.8
21.8
24.4
12.4
47.5
28.2
1.7
20.1
22.9
12.1
46.1
29.2
1.7
21.0
23.0
12.4
44.4
30.3
1.8
22.8
24.3
12.8
6.8
3.8
1.3
8.2
0.1
0.1
6.6
3.5
1.2
8.5
0.1
0.1
5.7
3.1
1.0
9.7
0.1
0.1
4.8
2.7
0.9
11.7
0.1
0.1
Growth (y-o-y %)
Net interest income
Non-interest income
Operating expense
PPOP
Provisions
PBT
PAT
Issuer information
Share price
(EGP)
Reuters (Equity)
Market cap (USDm)
Free float (%)
Country
Analyst
10.06
CIEB.CA
413
21
Egypt
Shirin Panicker
Target price
(EGP)
Bloomberg (Equity)
Market cap (EGPm)
Sector
Contact
13.50
3
(%) 0
.
6
CIEB EY
2,887
COMMERCIAL BANKS
+202 2 5298439
101
abc
Commercial Banks
MENA and Turkey
17 July 2013
Financials & valuation: CIB
Year to
P&L summary (EGPm)
Net Interest Income
Non-interest Income
Net fees/commission
Trading profits
Other
Operating expense
Staff costs
Other oper expenese
PPOP
Provisions
Bad debt
Other
HSBC PBT
Exceptionals
Profit-before tax
Taxation
PAT
Attributable profit
Total assets
Other assets
Total Liabilities
Customer deposits
Other liabilities
Total capital
Ordinary equity
IEA (avg)
IBL (avg)
RWA (EGPm)
Total tier 1
Total Capital
Per share data (EGP)
EPS
DPS
NAV (tangible)
Net interest income
Other income
Operating income
Operating expenses
Staff costs
Other oper exp
PPOP
Provisions
Non-op items
PBT
Taxation
PAT
102
12/2012a
12/2013e
Overweight
12/2014e
12/2015e
3,914
1,430
926
548
-44
5,344
-1,559
-762
-798
3,784
-610
-610
0
-93
2,901
0
3,081
-854
2,227
-1
2,226
2,020
4,391
1,579
1,134
400
45
5,971
-1,677
-856
-822
4,293
-678
-678
0
0
3,295
0
3,615
-1,012
2,603
-1
2,602
2,282
4,615
1,760
1,461
250
50
6,375
-1,807
-952
-855
4,569
-695
-695
0
0
3,539
0
3,874
-1,085
2,789
-1
2,788
2,454
5,073
2,122
1,914
150
58
7,194
-1,966
-1,069
-897
5,229
-343
-343
0
0
4,494
0
4,886
-1,319
3,567
-5
3,562
3,170
94,014
40,698
34,926
18,390
83,144
78,729
80
4,335
10,870
10,822
48
85,269
77,716
107,489
42,677
39,673
25,139
95,118
90,538
80
4,499
12,370
12,324
47
95,410
86,472
122,857
53,033
41,422
28,401
108,870
104,119
80
4,670
13,987
13,941
46
109,716
99,255
140,749
67,101
41,510
32,138
124,666
119,737
80
4,848
16,083
16,043
41
126,226
113,947
55,186
15.6
17.1
57,218
17.6
19.1
68,835
17.0
18.2
83,846
16.5
17.5
3.67
3.33
1.33
17.84
17.78
4.28
3.76
1.29
20.29
20.24
4.59
4.04
1.38
22.96
22.90
5.87
5.22
1.76
26.42
26.36
4.4
8.8
-4.4
1.0
0.6
6.0
-1.7
-0.8
-0.9
4.2
-0.7
-0.1
3.4
-1.0
0.0
2.5
4.4
8.7
-4.3
1.1
0.4
5.9
-1.7
-0.8
-0.8
4.3
-0.7
0.0
3.6
-1.0
0.0
2.6
4.0
7.4
-3.4
1.3
0.3
5.5
-1.6
-0.8
-0.7
4.0
-0.6
0.0
3.4
-0.9
0.0
2.4
3.8
7.6
-3.7
1.5
0.2
5.5
-1.5
-0.8
-0.7
4.0
-0.3
0.0
3.7
-1.0
0.0
2.7
Year to
12/2012a
12/2013e
12/2014e
12/2015e
45.5
14.9
7.6
52.3
90.2
46.8
33.7
12.2
10.4
7.6
13.5
11.2
13.6
13.0
5.1
11.5
7.7
6.4
2.4
7.4
7.5
9.9
20.5
8.8
14.4
-50.6
27.0
29.2
Net loans
Total assets
RWA
Customer deposits
Ratios (%)
NIM
Gross yield
Cost of funds
Spread
2.6
10.0
-0.3
10.2
4.9
14.3
3.7
15.0
24.3
14.3
20.3
15.0
26.5
14.6
21.8
15.0
4.59
9.22
5.08
4.14
4.60
9.16
5.03
4.13
4.21
7.81
3.98
3.83
4.02
7.92
4.32
3.60
NPL/gross loans
Credit cost
Coverage
NPL/RWA
Provision/RWA
NPL/NTA
Net loans/assets
RWA/assets
Loans/deposits
Avg IEA/avg assets
3.7
-1.44
152
2.9
-1.10
14.9
43.3
58.7
51.7
95.0
97.2
4.5
-1.53
152
3.7
-1.21
16.8
39.7
53.2
47.1
94.7
97.0
4.5
-1.35
149
4.1
-1.10
18.4
43.2
56.0
50.9
95.3
97.3
4.0
-0.54
146
3.7
-0.45
17.8
47.7
59.6
56.0
95.8
97.6
Cost/income
Leverage (x)
Valuation data
PE (diluted EPS)
P/PPOP
P/BVPS
Dividend yield (%)
P/Deposit
P/Asset
29.2
26.8
2.5
21.2
24.6
9.1
28.1
26.4
2.6
19.8
24.4
8.7
28.3
27.6
2.4
18.7
22.5
8.7
27.3
29.5
2.7
21.2
24.8
8.8
10.2
5.4
1.9
3.9
0.3
0.2
9.0
4.8
1.7
3.8
0.2
0.2
8.4
4.5
1.5
4.1
0.2
0.2
6.5
3.9
1.3
5.2
0.2
0.1
Growth (y-o-y %)
Net interest income
Non-interest income
Operating expense
PPOP
Provisions
PBT
PAT
Issuer information
Share price
(EGP)
Reuters (Equity)
Market cap (USDm)
Free float (%)
Country
Analyst
33.88
COMI.CA
2,907
91
Egypt
Aybek Islamov
Target price
(EGP)
Bloomberg (Equity)
Market cap (EGPm)
Sector
Contact
44.00
2
(%) 6
.
0
COMI EY
20,334
COMMERCIAL BANKS
+9714 423 6921
abc
Commercial Banks
MENA and Turkey
17 July 2013
Financials & valuation: Commercial Bank Of Qatar
Year to
P&L summary (QARm)
Net Interest Income
Non-interest Income
Net fees/commission
Trading profits
Other
Operating expense
Staff costs
Other oper expenese
PPOP
Provisions
Bad debt
Other
HSBC PBT
Exceptionals
Profit-before tax
Taxation
PAT
Attributable profit
Total assets
Other assets
Total Liabilities
Customer deposits
Other liabilities
Total capital
Ordinary equity
IEA (avg)
IBL (avg)
RWA (QARm)
Total tier 1
Total Capital
Per share data (QAR)
EPS
DPS
NAV (tangible)
Net interest income
Other income
Operating income
Operating expenses
Staff costs
Other oper exp
PPOP
Provisions
Non-op items
PBT
Taxation
PAT
12/2012a
12/2013e
12/2014e
12/2015e
1,866
1,118
519
340
259
2,984
-1,028
-499
-529
1,956
-140
-140
0
197
2,012
0
2,012
0
2,012
0
2,012
2,012
1,863
1,024
584
170
270
2,888
-1,109
-523
-586
1,779
-170
-170
0
241
1,849
0
1,849
0
1,849
0
1,849
1,849
1,968
1,173
645
236
292
3,140
-1,235
-575
-659
1,906
-197
-197
0
283
1,992
0
1,992
0
1,992
0
1,992
1,992
2,218
1,272
708
247
316
3,490
-1,378
-637
-741
2,111
-267
-267
0
314
2,159
0
2,159
0
2,159
0
2,159
2,159
80,038
48,594
9,953
21,490
65,098
41,386
12,177
11,535
14,939
14,939
0
67,857
59,725
89,452
55,829
10,317
23,306
74,194
48,835
12,177
13,182
15,258
15,258
0
75,756
67,882
100,194
64,147
10,779
25,267
84,381
57,137
12,177
15,067
15,813
15,813
0
84,507
77,347
112,776
73,673
11,344
27,760
96,253
66,850
12,177
17,225
16,524
16,524
0
94,663
88,183
67,088
15.4
17.0
75,138
13.9
15.5
84,155
12.9
14.4
94,253
12.1
13.6
8.13
8.13
6.00
60.37
60.37
7.47
7.47
5.61
61.66
61.66
8.05
8.05
5.64
63.91
63.91
8.72
8.72
5.67
66.78
66.78
2.5
3.8
-1.4
0.7
0.8
3.9
-1.4
-0.7
-0.7
2.6
-0.2
0.3
2.7
0.0
0.0
2.7
2.2
3.5
-1.3
0.7
0.5
3.4
-1.3
-0.6
-0.7
2.1
-0.2
0.3
2.2
0.0
0.0
2.2
2.1
3.4
-1.3
0.7
0.6
3.3
-1.3
-0.6
-0.7
2.0
-0.2
0.3
2.1
0.0
0.0
2.1
2.1
3.4
-1.4
0.7
0.5
3.3
-1.3
-0.6
-0.7
2.0
-0.3
0.3
2.0
0.0
0.0
2.0
Neutral
Year to
12/2012a
12/2013e
12/2014e
12/2015e
-3.7
20.7
17.5
-1.6
-41.5
6.8
6.8
-0.2
-8.4
7.8
-9.0
21.5
-8.1
-8.1
5.6
14.5
11.3
7.1
15.6
7.7
7.7
12.7
8.4
11.6
10.8
35.7
8.4
8.4
16.8
11.9
9.5
8.9
14.9
11.8
12.0
18.0
14.9
12.0
12.0
17.0
14.8
12.6
12.0
17.0
2.75
4.27
1.73
2.54
2.46
3.95
1.67
2.29
2.33
3.84
1.65
2.19
2.34
3.86
1.63
2.23
NPL/gross loans
Credit cost
Coverage
NPL/RWA
Provision/RWA
NPL/NTA
Net loans/assets
RWA/assets
Loans/deposits
Avg IEA/avg assets
1.1
-0.31
116
0.8
-0.22
3.6
60.7
83.8
117.4
89.5
97.6
1.3
-0.32
103
1.1
-0.24
4.9
62.4
84.0
114.3
89.4
97.5
1.5
-0.32
97
1.2
-0.25
6.2
64.0
84.0
112.3
89.1
97.6
1.6
-0.38
97
1.4
-0.30
7.4
65.3
83.6
110.2
88.9
97.6
Cost/income
Leverage (x)
Valuation data
PE (diluted EPS)
P/PPOP
P/BVPS
Dividend yield (%)
P/Deposit
P/Asset
34.5
37.5
2.7
13.8
19.7
5.2
38.4
35.5
2.2
12.2
17.8
5.6
39.3
37.3
2.1
12.8
18.7
6.1
39.5
36.4
2.0
13.4
19.4
6.6
8.8
9.0
1.2
8.4
0.4
0.2
9.6
9.9
1.2
7.9
0.4
0.2
8.9
9.3
1.1
7.9
0.3
0.2
8.2
8.4
1.1
7.9
0.3
0.2
Growth (y-o-y %)
Net interest income
Non-interest income
Operating expense
PPOP
Provisions
PBT
PAT
Net loans
Total assets
RWA
Customer deposits
Ratios (%)
NIM
Gross yield
Cost of funds
Spread
Issuer information
Share price
(QAR)
71.40
Reuters (Equity)
COMB.QA
Market cap (USDm)
4,852
Free float (%)
Country
Qatar
Analyst
Vikram Viswanathan
Target price
(QAR)
Bloomberg (Equity)
Market cap (QARm)
Sector
Contact
75.00
5
(%) .
8
CBQK QD
17,668
COMMERCIAL BANKS
+971 4 423 6931
103
abc
Commercial Banks
MENA and Turkey
17 July 2013
Financials & valuation: Doha Bank
Year to
P&L summary (QARm)
Net Interest Income
Non-interest Income
Net fees/commission
Trading profits
Other
Operating expense
Staff costs
Other oper expenese
PPOP
Provisions
Bad debt
Other
HSBC PBT
Exceptionals
Profit-before tax
Taxation
PAT
Attributable profit
Total assets
Other assets
Total Liabilities
Customer deposits
Other liabilities
Total capital
Ordinary equity
IEA (avg)
IBL (avg)
RWA (QARm)
Total tier 1
Total Capital
EPS
DPS
NAV (tangible)
Net interest income
Other income
Operating income
Operating expenses
Staff costs
Other oper exp
PPOP
Provisions
Non-op items
PBT
Taxation
PAT
104
12/2012a
12/2013e
12/2014e
Overweight
12/2015e
1,679
740
350
213
178
2,419
-835
-413
-422
1,584
-190
-190
0
-86
1,309
0
1,309
-4
1,305
0
1,305
1,305
1,839
712
380
125
208
2,551
-899
-442
-457
1,652
-172
-172
0
-50
1,431
0
1,431
-3
1,428
0
1,428
1,428
2,093
825
422
163
240
2,918
-972
-473
-499
1,946
-206
-206
0
-32
1,709
0
1,709
-3
1,705
0
1,705
1,705
2,413
943
472
198
274
3,356
-1,065
-520
-545
2,291
-271
-271
0
-33
1,987
0
1,987
-4
1,983
0
1,983
1,983
55,212
33,775
8,859
12,578
47,661
34,401
2,572
10,688
7,551
7,551
0
51,717
44,897
64,407
40,689
9,302
14,416
52,072
37,841
2,572
11,658
12,336
12,336
0
57,207
47,845
73,744
48,877
9,767
15,099
60,702
45,409
2,572
12,721
13,041
13,041
0
66,433
54,265
83,501
57,180
10,256
16,066
69,585
53,129
2,572
13,884
13,916
13,916
0
76,628
62,915
51,947
10.9
13.6
62,337
16.3
18.8
74,804
14.4
16.7
86,025
13.5
15.6
6.31
6.31
4.50
36.53
36.53
4.61
4.61
3.22
39.79
39.79
5.50
5.50
3.57
42.06
42.06
6.40
6.40
3.84
44.88
44.88
3.1
4.2
-1.1
0.7
0.7
4.5
-1.6
-0.8
-0.8
2.9
-0.4
-0.2
2.4
0.0
0.0
2.4
3.1
4.0
-0.9
0.6
0.6
4.3
-1.5
-0.7
-0.8
2.8
-0.3
-0.1
2.4
0.0
0.0
2.4
3.0
3.8
-0.8
0.6
0.6
4.2
-1.4
-0.7
-0.7
2.8
-0.3
0.0
2.5
0.0
0.0
2.5
3.1
3.9
-0.9
0.6
0.6
4.3
-1.4
-0.7
-0.7
2.9
-0.3
0.0
2.5
0.0
0.0
2.5
Year to
12/2012a
12/2013e
12/2014e
12/2015e
-3.6
24.9
5.0
3.0
-26.2
5.0
5.1
9.5
-3.7
7.6
4.3
-9.5
9.3
9.4
13.9
15.8
8.1
17.8
20.0
19.4
19.4
15.3
14.4
9.6
17.7
31.5
16.3
16.3
Growth (y-o-y %)
Net interest income
Non-interest income
Operating expense
PPOP
Provisions
PBT
PAT
Net loans
Total assets
RWA
Customer deposits
Ratios (%)
NIM
Gross yield
Cost of funds
Spread
10.0
5.3
4.0
8.5
20.5
16.7
20.0
10.0
20.1
14.5
20.0
20.0
17.0
13.2
15.0
17.0
3.25
4.40
1.33
3.07
3.21
4.14
1.10
3.03
3.15
4.00
1.04
2.96
3.15
4.05
1.10
2.95
NPL/gross loans
Credit cost
Coverage
NPL/RWA
Provision/RWA
NPL/NTA
Net loans/assets
RWA/assets
Loans/deposits
Avg IEA/avg assets
2.8
-0.57
87
1.9
-0.37
12.9
61.2
94.1
98.2
96.1
96.6
2.5
-0.45
92
1.8
-0.30
8.3
63.2
96.8
107.5
95.6
95.9
2.4
-0.45
92
1.7
-0.30
9.0
66.3
101.4
107.6
96.2
96.2
2.4
-0.50
90
1.8
-0.34
10.1
68.5
103.0
107.6
97.5
96.6
Cost/income
Leverage (x)
Valuation data
PE (diluted EPS)
P/PPOP
P/BVPS
Dividend yield (%)
P/Deposit
P/Asset
34.5
30.6
2.4
17.8
23.7
7.4
35.2
27.9
2.4
14.4
18.0
6.0
33.3
28.3
2.5
13.4
16.3
5.4
31.7
28.1
2.5
14.7
17.7
5.8
7.6
6.3
1.3
9.4
0.3
0.2
10.4
9.0
1.2
6.7
0.4
0.2
8.7
7.7
1.1
7.4
0.3
0.2
7.5
6.5
1.1
8.0
0.3
0.2
Issuer information
Share price
(QAR)
48.05
Reuters (Equity)
DOBK.QA
Market cap (USDm)
3,410
Free float (%)
Country
Qatar
Analyst
Vikram Viswanathan
Target price
(QAR)
Bloomberg (Equity)
Market cap (QARm)
Sector
Contact
60.00
2
(%) 6
.
8
DHBK QD
12,414
COMMERCIAL BANKS
+971 4 423 6931
abc
Commercial Banks
MENA and Turkey
17 July 2013
Financials & valuation: First Gulf Bank
Year to
P&L summary (AEDm)
Net Interest Income
Non-interest Income
Net fees/commission
Trading profits
Other
Operating expense
Staff costs
Other oper expenese
PPOP
Provisions
Bad debt
Other
HSBC PBT
Exceptionals
Profit-before tax
Taxation
PAT
Attributable profit
Total assets
Other assets
Total Liabilities
Customer deposits
Other liabilities
Total capital
Ordinary equity
IEA (avg)
IBL (avg)
RWA (SARm)
Total tier 1
Total Capital
EPS
DPS
NAV (tangible)
Net interest income
Other income
Operating income
Operating expenses
Staff costs
Other oper exp
PPOP
Provisions
Non-op items
PBT
Taxation
PAT
12/2012a
12/2013e
12/2014e
Neutral
12/2015e
5,520
1,749
1,300
77
372
7,270
-1,426
-685
-740
5,844
-1,653
-1,653
0
0
4,191
0
4,191
-20
4,171
-257
3,914
3,914
5,810
1,936
1,392
147
396
7,746
-1,642
-788
-854
6,104
-1,437
-1,437
0
-43
4,624
0
4,624
-22
4,602
-258
4,343
4,343
6,060
1,987
1,464
77
446
8,047
-1,834
-883
-951
6,212
-1,081
-1,081
0
-44
5,087
0
5,087
-24
5,063
-260
4,803
4,803
6,154
2,164
1,619
60
485
8,319
-2,014
-971
-1,042
6,305
-602
-602
0
-47
5,656
0
5,656
-27
5,629
-262
5,367
5,367
175,034
114,644
14,091
46,298
149,171
119,305
0
29,866
25,863
25,863
0
151,441
137,826
184,282
125,590
15,027
43,665
159,076
133,621
0
25,454
25,207
25,207
0
165,230
149,693
199,867
138,441
16,028
45,398
172,551
146,983
0
25,567
27,317
27,317
0
178,301
161,162
218,193
153,646
17,098
47,449
188,487
162,792
0
25,695
29,706
29,706
0
195,117
175,635
143,447
18.8
21.3
157,247
18.6
18.6
172,972
18.1
18.1
191,576
17.6
17.6
1.30
1.30
0.83
8.62
8.62
1.45
1.45
0.90
8.40
8.40
1.60
1.60
0.99
9.11
9.11
1.79
1.79
1.11
9.90
9.90
3.3
4.6
-1.3
0.8
0.3
4.4
-0.9
-0.4
-0.4
3.5
-1.0
0.0
2.5
0.0
-0.2
2.4
3.2
4.2
-1.0
0.8
0.3
4.3
-0.9
-0.4
-0.5
3.4
-0.8
0.0
2.6
0.0
-0.1
2.4
3.2
4.0
-0.8
0.8
0.3
4.2
-1.0
-0.5
-0.5
3.2
-0.6
0.0
2.6
0.0
-0.1
2.5
2.9
4.0
-1.1
0.8
0.3
4.0
-1.0
-0.5
-0.5
3.0
-0.3
0.0
2.7
0.0
-0.1
2.6
Year to
12/2012a
12/2013e
12/2014e
12/2015e
8.7
24.6
16.5
11.1
6.4
13.1
13.8
5.2
10.7
15.2
4.5
-13.0
10.3
11.0
4.3
2.6
11.7
1.8
-24.8
10.0
10.6
1.6
8.9
9.8
1.5
-44.3
11.2
11.7
Net loans
Total assets
RWA
Customer deposits
Ratios (%)
NIM
Gross yield
Cost of funds
Spread
9.5
11.1
5.5
15.3
9.5
5.3
9.6
12.0
10.2
8.5
10.0
10.0
11.0
9.2
10.8
10.8
3.65
5.05
1.54
3.51
3.52
4.58
1.18
3.41
3.40
4.26
0.95
3.31
3.15
4.34
1.31
3.02
NPL/gross loans
Credit cost
Coverage
NPL/RWA
Provision/RWA
NPL/NTA
Net loans/assets
RWA/assets
Loans/deposits
Avg IEA/avg assets
3.3
-1.46
96
2.8
-1.18
15.1
65.5
82.0
96.1
91.1
97.1
3.3
-1.16
98
2.8
-0.96
17.0
68.2
85.3
94.0
92.0
97.1
3.1
-0.79
98
2.7
-0.65
16.2
69.3
86.5
94.2
92.8
97.2
3.0
-0.40
94
2.6
-0.33
16.0
70.4
87.8
94.4
93.3
97.3
Cost/income
Leverage (x)
Valuation data
PE (diluted EPS)
P/PPOP
P/BVPS
Dividend yield (%)
P/Deposit
P/Asset
19.6
24.1
2.4
16.1
14.6
6.8
21.2
25.0
2.4
17.0
15.5
7.0
22.8
24.7
2.5
18.3
15.9
7.3
24.2
26.0
2.6
18.8
16.5
7.3
13.0
8.7
2.0
4.9
0.4
0.3
11.7
8.3
2.0
5.3
0.4
0.3
10.6
8.2
1.9
5.9
0.3
0.3
9.5
8.1
1.7
6.5
0.3
0.2
Growth (y-o-y %)
Net interest income
Non-interest income
Operating expense
PPOP
Provisions
PBT
PAT
Issuer information
Share price
(AED)
16.95
Reuters (Equity)
FGB.AD
Market cap (USDm)
13,843
Free float (%)
88
Country
Analyst
Aybek Islamov
Target price
(AED)
Bloomberg (Equity)
Market cap (AEDm)
Sector
Contact
17.90
(%) 6
.
3
FGB UH
50,850
COMMERCIAL BANKS
+9714 423 6921
105
abc
Commercial Banks
MENA and Turkey
17 July 2013
Financials & valuation: Kuwait Finance House
Year to
P&L summary (KWDm)
Net Interest Income
Non-interest Income
Net fees/commission
Trading profits
Other
Operating expense
Staff costs
Other oper expenese
PPOP
Provisions
Bad debt
Other
HSBC PBT
Exceptionals
Profit-before tax
Taxation
PAT
Attributable profit
Total assets
Other assets
Total Liabilities
Customer deposits
Other liabilities
Total capital
Ordinary equity
IEA (avg)
IBL (avg)
RWA (KWDm)
Total tier 1
Total Capital
EPS
DPS
NAV (tangible)
Net interest income
Other income
Operating income
Operating expenses
Staff costs
Other oper exp
PPOP
Provisions
Non-op items
PBT
Taxation
PAT
106
12/2012a
12/2013e
12/2014e
12/2015e
363
340
73
198
70
703
-322
-136
-186
381
-184
-184
0
-71
126
0
126
-2
123
-36
88
88
386
369
83
213
73
756
-344
-148
-197
411
-150
-150
0
-65
196
0
196
-4
193
-29
164
164
414
427
94
242
91
841
-374
-161
-213
467
-147
-147
0
-74
245
0
245
-7
238
-36
203
203
457
453
108
242
104
910
-406
-175
-230
504
-142
-142
0
-91
272
0
272
-8
264
-40
225
225
14,703
6,653
603
7,447
13,064
9,393
0
3,671
1,639
1,328
311
8,841
11,174
16,397
7,378
693
8,326
14,273
10,416
0
3,857
2,123
1,783
340
9,751
12,216
17,894
8,169
780
8,945
15,590
11,533
0
4,057
1,928
1,928
0
10,765
13,401
19,781
9,217
858
9,705
17,283
13,013
0
4,270
2,082
2,082
0
11,939
14,821
11,086
13.6
13.9
12,433
15.5
16.0
13,890
14.8
15.3
15,755
13.9
14.5
0.03
0.03
0.01
0.46
0.46
0.04
0.04
0.01
0.47
0.47
0.05
0.05
0.02
0.50
0.50
0.06
0.06
0.02
0.54
0.54
2.6
4.2
-1.6
0.5
1.9
5.0
-2.3
-1.0
-1.3
2.7
-1.3
-0.5
0.9
0.0
-0.3
0.6
2.5
3.9
-1.4
0.5
1.8
4.9
-2.2
-0.9
-1.3
2.6
-1.0
-0.4
1.3
0.0
-0.2
1.1
2.4
3.8
-1.4
0.6
1.9
4.9
-2.2
-0.9
-1.2
2.7
-0.9
-0.4
1.4
0.0
-0.2
1.2
2.4
3.9
-1.4
0.6
1.8
4.8
-2.2
-0.9
-1.2
2.7
-0.8
-0.5
1.4
0.0
-0.2
1.2
Underweight
Year to
12/2012a
12/2013e
12/2014e
12/2015e
8.7
2.4
5.2
5.9
6.4
226.0
9.1
6.6
8.6
7.1
7.9
-18.4
56.3
86.9
7.0
15.7
8.5
13.5
-2.1
25.0
23.7
10.4
6.2
8.5
8.1
-3.5
10.8
10.8
Net loans
Total assets
RWA
Customer deposits
Ratios (%)
NIM
Gross yield
Cost of funds
Spread
13.4
9.2
6.6
5.8
10.9
11.5
12.2
10.9
10.7
9.1
11.7
10.7
12.8
10.5
13.4
12.8
4.10
6.71
2.06
4.65
3.96
6.25
1.83
4.42
3.84
6.11
1.83
4.29
3.83
6.09
1.82
4.27
NPL/gross loans
Credit cost
Coverage
NPL/RWA
Provision/RWA
NPL/NTA
Net loans/assets
RWA/assets
Loans/deposits
Avg IEA/avg assets
9.6
-2.74
52%
6.3
-1.71
52.3
45.2
75.4
70.8
62.8
89.5
9.0
-2.00
60%
6.1
-1.28
40.7
45.0
75.8
70.8
62.7
89.4
8.5
-1.75
68%
5.7
-1.12
39.5
45.7
77.6
70.8
62.8
89.8
8.0
-1.50
74%
5.4
-0.96
39.1
46.6
79.6
70.8
63.4
90.2
Cost/income
Leverage (x)
Valuation data
PE (diluted EPS)
P/PPOP
P/BVPS
Dividend yield (%)
P/Deposit
P/Asset
45.8
48.4
0.6
6.7
6.0
8.8
45.6
48.8
1.1
10.5
9.5
8.3
44.5
50.8
1.2
10.9
10.2
8.5
44.6
49.8
1.2
11.2
10.5
9.4
22.0
5.1
1.5
1.4
0.2
0.1
15.7
6.2
1.5
2.2
0.2
0.2
12.7
5.5
1.4
2.7
0.2
0.1
11.4
5.1
1.3
3.4
0.2
0.1
Growth (y-o-y %)
Net interest income
Non-interest income
Operating expense
PPOP
Provisions
PBT
PAT
Issuer information
Share price
(KWD)
0.68
Reuters (Equity)
KFIN.KW
Market cap (USDm)
9,123
Free float (%)
100
Country
Kuwait
Analyst
Vikram Viswanathan
Target price
(KWD)
Bloomberg (Equity)
Market cap (KWDm)
Sector
Contact
0.64
1
(%) 1
.
3
KFIN KK
2,607
COMMERCIAL BANKS
+971 4 423 6931
abc
Commercial Banks
MENA and Turkey
17 July 2013
Financials & valuation:
Year to
P&L summary (QARm)
Net Interest Income
Non-interest Income
Net fees/commission
Trading profits
Other
Operating expense
Staff costs
Other oper expenese
PPOP
Provisions
Bad debt
Other
HSBC PBT
Exceptionals
Profit-before tax
Taxation
PAT
Attributable profit
Total assets
Other assets
Total Liabilities
Customer deposits
Other liabilities
Total capital
Ordinary equity
IEA (avg)
IBL (avg)
RWA (QARm)
Total tier 1
Total Capital
EPS
DPS
NAV (tangible)
Net interest income
Other income
Operating income
Operating expenses
Staff costs
Other oper exp
PPOP
Provisions
Non-op items
PBT
Taxation
PAT
12/2012a
Masraf Al-Rayan
12/2013e
12/2014e
12/2015e
1,594
241
113
31
98
1,835
-348
-227
-121
1,487
34
34
0
1,725
266
123
50
93
1,991
-388
-254
-134
1,603
-124
-118
-6
1,809
268
138
30
101
2,077
-432
-285
-147
1,645
-176
-163
-12
2,040
288
154
25
109
2,328
-475
-313
-162
1,852
-201
-188
-13
1,522
0
1,522
-2
1,520
-16
1,504
1,504
1,479
0
1,479
0
1,479
-30
1,449
1,449
1,469
0
1,469
0
1,469
-29
1,440
1,440
1,652
0
1,652
0
1,652
-33
1,619
1,619
61,628
42,769
11,777
7,082
51,894
45,010
0
6,885
9,734
9,734
0
56,345
48,829
69,129
49,259
11,960
7,910
58,696
51,761
0
6,935
10,433
10,433
0
63,003
54,769
77,663
56,698
12,319
8,647
66,515
59,525
0
6,990
11,148
11,148
0
70,727
62,027
87,552
65,252
12,688
9,611
75,504
68,454
0
7,050
12,047
12,047
0
79,647
70,373
42,542
16.9
16.9
48,923
16.2
16.2
56,262
15.3
15.3
64,701
14.6
14.6
2.01
2.01
1.00
12.98
12.98
1.93
1.93
0.97
13.91
13.91
1.92
1.92
0.96
14.86
14.86
2.16
2.16
1.08
16.06
16.06
2.7
3.9
-1.1
0.2
0.2
3.1
-0.6
-0.4
-0.2
2.5
0.1
0.0
2.6
0.0
0.0
2.6
2.6
3.6
-1.0
0.2
0.2
3.0
-0.6
-0.4
-0.2
2.5
-0.2
0.0
2.3
0.0
0.0
2.2
2.5
3.4
-1.0
0.2
0.2
2.8
-0.6
-0.4
-0.2
2.2
-0.2
0.0
2.0
0.0
0.0
2.0
2.5
3.4
-1.0
0.2
0.2
2.8
-0.6
-0.4
-0.2
2.2
-0.2
0.0
2.0
0.0
0.0
2.0
Underweight
Year to
12/2012a
12/2013e
12/2014e
12/2015e
21.6
-51.9
10.5
-0.6
n/a
7.9
6.8
8.2
10.4
11.5
7.8
n/a
-2.8
-3.7
4.8
0.9
11.3
2.6
41.2
-0.6
-0.6
12.8
7.3
10.0
12.6
14.2
12.4
12.4
Net loans
Total assets
RWA
Customer deposits
Ratios (%)
NIM
Gross yield
Cost of funds
Spread
23.0
11.5
20.9
36.1
15.2
12.2
15.0
15.0
15.1
12.3
15.0
15.0
15.1
12.7
15.0
15.0
2.83
4.01
1.37
2.65
2.74
3.74
1.15
2.59
2.56
3.56
1.15
2.42
2.56
3.57
1.15
2.43
NPL/gross loans
Credit cost
Coverage
NPL/RWA
Provision/RWA
NPL/NTA
Net loans/assets
RWA/assets
Loans/deposits
Avg IEA/avg assets
0.1
0.09
125
0.1
0.09
0.4
69.4
69.0
95.0
96.4
99.0
0.2
-0.27
172
0.2
-0.27
1.0
71.3
70.8
95.2
96.4
99.0
0.3
-0.33
192
0.3
-0.33
1.6
73.0
72.4
95.2
96.4
99.1
0.4
-0.33
200
0.4
-0.33
2.2
74.5
73.9
95.3
96.4
99.1
Cost/income
Leverage (x)
Valuation data
PE (diluted EPS)
P/PPOP
P/BVPS
Dividend yield (%)
P/Deposit
P/Asset
19.0
13.1
2.6
16.5
20.5
6.4
19.5
13.4
2.2
14.4
19.2
6.5
20.8
12.9
2.0
13.3
17.4
6.8
20.4
12.4
2.0
14.0
17.9
7.1
13.8
14.0
2.1
3.6
0.5
0.3
14.4
13.0
2.0
3.5
0.4
0.3
14.5
12.7
1.9
3.5
0.3
0.3
12.9
11.2
1.7
3.9
0.3
0.2
Growth (y-o-y %)
Net interest income
Non-interest income
Operating expense
PPOP
Provisions
PBT
PAT
Issuer information
Share price
(QAR)
27.75
Reuters (Equity)
MARK.QA
Market cap (USDm)
5,716
Free float (%)
Country
Qatar
Analyst
Vikram Viswanathan
Target price
(QAR)
Bloomberg (Equity)
Market cap (QARm)
Sector
Contact
24.00
(%) 1
3
.
5
MARK QD
20,813
COMMERCIAL BANKS
+971 4 423 6931
107
abc
Commercial Banks
MENA and Turkey
17 July 2013
Financials & valuation: National Bank of Abu Dhabi
Year to
P&L summary (AEDm)
Net Interest Income
Non-interest Income
Net fees/commission
Trading profits
Other
Operating expense
Staff costs
Other oper expenese
PPOP
Provisions
Bad debt
Other
HSBC PBT
Exceptionals
Profit-before tax
Taxation
PAT
Attributable profit
Total assets
Other assets
Total Liabilities
Customer deposits
Other liabilities
Total capital
Ordinary equity
IEA (avg)
IBL (avg)
RWA (SARm)
Total tier 1
Total Capital
EPS
DPS
NAV (tangible)
Net interest income
Other income
Operating income
Operating expenses
Staff costs
Other oper exp
PPOP
Provisions
Non-op items
PBT
Taxation
PAT
108
12/2012a
12/2013e
12/2014e
12/2015e
6,096
2,575
1,546
534
494
8,671
-2,870
-1,927
-943
5,801
-1,337
-1,337
0
0
4,464
0
4,464
-132
4,332
-240
4,092
4,092
6,388
3,120
1,757
607
756
9,508
-3,179
-2,159
-1,020
6,329
-1,255
-1,255
0
0
5,074
0
5,074
-152
4,922
-240
4,682
4,682
6,842
3,000
2,017
358
626
9,842
-3,497
-2,374
-1,122
6,345
-990
-990
0
0
5,355
0
5,355
-161
5,195
-240
4,955
4,955
7,378
3,181
2,229
315
637
10,559
-3,846
-2,612
-1,235
6,712
-878
-878
0
0
5,835
0
5,835
-175
5,660
-240
5,420
5,420
300,599
164,599
34,935
101,065
273,466
190,304
31,567
51,595
27,133
27,133
0
265,386
240,815
334,310
180,457
44,791
109,062
303,356
209,334
36,985
57,037
30,954
30,954
0
300,811
273,464
364,875
199,909
56,195
108,771
330,137
228,174
40,012
61,951
34,738
34,738
0
327,920
300,558
395,969
221,745
68,550
105,673
357,298
246,428
43,553
67,317
38,671
38,671
0
356,586
326,720
177,068
17.2
21.0
194,681
17.8
23.3
215,589
17.8
22.9
238,804
17.7
22.5
0.94
0.94
0.22
6.19
6.19
1.09
1.09
0.30
7.06
7.06
1.15
1.15
0.38
7.93
7.93
1.26
1.26
0.46
8.82
8.82
2.2
3.0
-0.8
0.6
0.4
3.1
-1.0
-0.7
-0.3
2.1
-0.5
0.0
1.6
0.0
-0.1
1.5
2.0
2.5
-0.5
0.6
0.4
3.0
-1.0
-0.7
-0.3
2.0
-0.4
0.0
1.6
0.0
-0.1
1.5
2.0
2.4
-0.5
0.6
0.3
2.8
-1.0
-0.7
-0.3
1.8
-0.3
0.0
1.5
0.0
-0.1
1.4
1.9
2.7
-0.8
0.6
0.3
2.8
-1.0
-0.7
-0.3
1.8
-0.2
0.0
1.5
0.0
-0.1
1.4
Neutral
Year to
12/2012a
12/2013e
12/2014e
12/2015e
5.1
23.9
11.9
9.1
-10.8
16.9
18.0
4.8
21.2
10.8
9.1
-6.1
13.7
14.4
7.1
-3.8
10.0
0.3
-21.1
5.5
5.8
7.8
6.0
10.0
5.8
-11.3
9.0
9.4
Net loans
Total assets
RWA
Customer deposits
Ratios (%)
NIM
Gross yield
Cost of funds
Spread
3.2
17.6
1.3
25.4
9.6
11.2
9.9
10.0
10.8
9.1
10.7
9.0
10.9
8.5
10.8
8.0
2.30
3.13
0.91
2.21
2.12
2.69
0.62
2.07
2.09
2.58
0.54
2.04
2.07
2.90
0.90
1.99
NPL/gross loans
Credit cost
Coverage
NPL/RWA
Provision/RWA
NPL/NTA
Net loans/assets
RWA/assets
Loans/deposits
Avg IEA/avg assets
3.8
-0.80
85
3.7
-0.76
23.9
54.8
58.9
86.5
95.4
95.0
3.9
-0.70
91
3.9
-0.68
23.4
54.0
58.2
86.2
94.8
94.8
3.7
-0.50
96
3.8
-0.48
22.2
54.8
59.1
87.6
93.8
94.9
3.5
-0.40
100
3.6
-0.39
20.9
56.0
60.3
90.0
93.7
95.1
Cost/income
Leverage (x)
Valuation data
PE (diluted EPS)
P/PPOP
P/BVPS
Dividend yield (%)
P/Deposit
P/Asset
33.1
29.7
1.5
16.5
14.2
11.2
33.4
32.8
1.5
16.1
14.4
10.9
35.5
30.5
1.4
15.1
13.6
10.6
36.4
30.1
1.4
14.8
13.4
10.4
12.9
9.1
2.0
1.8
0.3
0.2
11.1
8.4
1.7
2.5
0.3
0.2
10.5
8.4
1.5
3.2
0.2
0.1
9.6
7.9
1.4
3.8
0.2
0.1
Growth (y-o-y %)
Net interest income
Non-interest income
Operating expense
PPOP
Provisions
PBT
PAT
Issuer information
Share price
(AED)
12.10
Reuters (Equity)
NBAD.AD
Market cap (USDm)
14,183
Free float (%)
30
Country
Analyst
Aybek Islamov
Target price
(AED)
Bloomberg (Equity)
Market cap (AEDm)
Sector
Contact
12.70
8
(%) .
3
NBAD UH
52,097
COMMERCIAL BANKS
+9714 423 6921
abc
Commercial Banks
MENA and Turkey
17 July 2013
Financials & valuation:
Year to
P&L summary (KWDm)
Net Interest Income
Non-interest Income
Net fees/commission
Trading profits
Other
Operating expense
Staff costs
Other oper expenese
PPOP
Provisions
Bad debt
Other
HSBC PBT
Exceptionals
Profit-before tax
Taxation
PAT
Attributable profit
Total assets
Other assets
Total Liabilities
Customer deposits
Other liabilities
Total capital
Ordinary equity
IEA (avg)
IBL (avg)
RWA (KWDm)
Total tier 1
Total Capital
EPS
DPS
NAV (tangible)
Net interest income
Other income
Operating income
Operating expenses
Staff costs
Other oper exp
PPOP
Provisions
Non-op items
PBT
Taxation
PAT
12/2012a
12/2013e
12/2014e
12/2015e
398
239
103
106
29
637
-184
-102
-82
453
-124
-124
0
-1
327
0
327
-19
309
-3
305
305
438
179
109
32
38
617
-197
-109
-88
419
-76
-76
0
4
348
0
348
-21
327
-7
321
321
470
191
116
33
41
661
-211
-117
-94
450
-77
-77
0
5
378
0
378
-22
356
-7
349
349
512
207
127
35
45
719
-225
-125
-100
494
-86
-86
0
6
414
0
414
-25
389
-8
381
381
16,424
9,874
1,203
5,347
13,876
9,508
0
4,369
1,913
1,792
121
13,616
12,386
17,748
10,770
1,247
5,731
15,001
10,404
0
4,598
2,112
1,984
128
15,602
14,214
19,323
11,899
1,296
6,128
16,355
11,516
0
4,839
2,333
2,198
135
17,098
15,431
21,154
13,270
1,349
6,535
17,954
12,859
0
5,094
2,565
2,422
143
18,767
16,883
10,113
16.4
17.0
11,066
16.7
17.3
12,249
16.6
17.3
13,678
16.4
17.2
0.07
0.07
0.03
0.42
0.42
0.08
0.08
0.03
0.46
0.46
0.08
0.08
0.04
0.51
0.51
0.09
0.09
0.04
0.57
0.57
2.6
3.5
-0.8
0.7
0.9
4.2
-1.2
-0.7
-0.5
3.0
-0.8
0.0
2.2
-0.1
0.0
2.0
2.6
3.4
-0.8
0.6
0.4
3.6
-1.2
-0.6
-0.5
2.5
-0.4
0.0
2.0
-0.1
0.0
1.9
2.5
3.3
-0.8
0.6
0.4
3.6
-1.1
-0.6
-0.5
2.4
-0.4
0.0
2.0
-0.1
0.0
1.9
2.5
3.3
-0.8
0.6
0.4
3.6
-1.1
-0.6
-0.5
2.4
-0.4
0.0
2.0
-0.1
0.0
1.9
Year to
Neutral
12/2012a
12/2013e
12/2014e
12/2015e
4.4
67.9
13.4
25.4
137.2
2.0
0.9
10.1
-25.2
7.3
-7.4
-39.2
6.3
5.1
7.4
6.7
6.8
7.4
2.2
8.7
8.7
8.8
8.5
6.8
9.6
11.2
9.4
9.4
20.7
20.5
17.8
39.8
9.1
8.1
9.4
9.4
10.5
8.9
10.7
10.7
11.5
9.5
11.7
11.7
2.92
3.83
1.00
2.83
2.81
3.69
0.97
2.72
2.75
3.62
0.97
2.66
2.73
3.61
0.98
2.63
NPL/gross loans
Credit cost
Coverage
NPL/RWA
Provision/RWA
NPL/NTA
Net loans/assets
RWA/assets
Loans/deposits
Avg IEA/avg assets
2.8
-1.32
152
3.0
-1.33
15.8
60.1
61.6
103.9
90.6
98.4
2.8
-0.70
162
2.9
-0.71
15.7
60.7
62.3
103.5
91.3
98.4
2.7
-0.65
170
2.9
-0.66
15.6
61.6
63.4
103.3
92.2
98.4
2.8
-0.65
174
3.0
-0.66
15.9
62.7
64.7
103.2
92.7
98.4
Cost/income
Leverage (x)
Valuation data
PE (diluted EPS)
P/PPOP
P/BVPS
Dividend yield (%)
P/Deposit
P/Asset
28.9
37.5
2.0
15.6
18.9
7.4
32.0
29.0
1.9
17.0
18.3
8.5
31.9
28.8
1.9
16.7
18.0
8.3
31.3
28.8
1.9
16.5
17.8
8.3
13.7
9.2
2.3
3.1
0.4
0.3
13.0
9.9
2.1
3.2
0.4
0.2
12.0
9.3
1.9
3.8
0.4
0.2
10.9
8.5
1.7
4.1
0.3
0.2
Growth (y-o-y %)
Net interest income
Non-interest income
Operating expense
PPOP
Provisions
PBT
PAT
Net loans
Total assets
RWA
Customer deposits
Ratios (%)
NIM
Gross yield
Cost of funds
Spread
Issuer information
Share price
(KWD)
0.93
Reuters (Equity)
NBKK.KW
Market cap (USDm)
14,879
Free float (%)
Country
Kuwait
Analyst
Vikram Viswanathan
Target price
(KWD)
Bloomberg (Equity)
Market cap (KWDm)
Sector
Contact
1.02
1
(%) 4
.
8
NBK KK
4,251
COMMERCIAL BANKS
+971 4 423 6931
109
abc
Commercial Banks
MENA and Turkey
17 July 2013
Financials & valuation: National Bank of Oman
Year to
P&L summary (OMRm)
Net Interest Income
Non-interest Income
Net fees/commission
Trading profits
Other
Operating expense
Staff costs
Other oper expenese
PPOP
Provisions
Bad debt
Other
HSBC PBT
Exceptionals
Profit-before tax
Taxation
PAT
Attributable profit
Total assets
Other assets
Total Liabilities
Customer deposits
Other liabilities
Total capital
Ordinary equity
IEA (avg)
IBL (avg)
RWA (OMRm)
Total tier 1
Total Capital
Per share data (OMR)
EPS
DPS
NAV (tangible)
Net interest income
Other income
Operating income
Operating expenses
Staff costs
Other oper exp
PPOP
Provisions
Non-op items
PBT
Taxation
PAT
110
12/2012a
12/2013e
12/2014e
12/2015e
67
31
24
0
7
99
-47
-27
-20
52
-4
-4
0
-2
47
0
47
-6
41
0
41
41
71
33
25
1
8
105
-51
-29
-22
54
-11
-11
0
-3
40
0
40
-6
34
0
34
34
78
35
26
1
8
114
-55
-32
-23
59
-12
-12
0
-4
43
0
43
-6
37
0
37
37
90
39
28
3
8
129
-60
-35
-25
69
-15
-15
0
-4
50
0
50
-7
43
0
43
43
2,538
1,912
90
536
2,233
1,887
62
285
304
304
0
2,282
2,018
2,809
2,141
94
574
2,489
2,114
62
313
319
319
0
2,581
2,283
3,118
2,398
99
621
2,776
2,370
62
345
341
341
0
2,886
2,547
3,488
2,709
104
675
3,121
2,680
62
379
368
368
0
3,234
2,854
2,398
11.7
14.4
2,687
11.0
13.5
3,012
10.5
12.9
3,405
10.1
12.4
0.04
0.04
0.02
0.27
0.27
0.03
0.03
0.01
0.29
0.29
0.03
0.03
0.02
0.31
0.31
0.04
0.04
0.02
0.33
0.33
2.8
4.5
-1.7
1.0
0.3
4.1
-2.0
-1.1
-0.8
2.2
-0.2
-0.1
2.0
-0.3
0.0
1.7
2.7
4.4
-1.7
0.9
0.3
3.9
-1.9
-1.1
-0.8
2.0
-0.4
-0.1
1.5
-0.2
0.0
1.3
2.6
4.4
-1.8
0.9
0.3
3.8
-1.9
-1.1
-0.8
2.0
-0.4
-0.1
1.5
-0.2
0.0
1.3
2.7
4.5
-1.8
0.9
0.3
3.9
-1.8
-1.0
-0.8
2.1
-0.4
-0.1
1.5
-0.2
0.0
1.3
Neutral
Year to
12/2012a
12/2013e
12/2014e
12/2015e
15.5
-7.6
7.4
6.5
-52.0
20.6
18.9
6.2
5.5
8.3
3.8
181.6
-14.3
-15.4
10.0
6.8
8.8
9.1
12.1
8.6
8.6
14.3
10.0
8.8
16.8
23.9
15.8
15.8
14.4
13.9
13.9
17.9
12.0
10.7
12.1
12.1
12.0
11.0
12.1
12.1
13.0
11.9
13.1
13.1
3.04
4.69
1.98
2.71
2.76
4.57
2.04
2.53
2.72
4.53
2.06
2.48
2.77
4.64
2.12
2.52
NPL/gross loans
Credit cost
Coverage
NPL/RWA
Provision/RWA
NPL/NTA
Net loans/assets
RWA/assets
Loans/deposits
Avg IEA/avg assets
2.7
-0.20
141
2.4
-0.17
17.5
75.3
94.5
101.3
95.8
96.5
2.7
-0.50
143
2.3
-0.41
18.7
76.2
95.7
101.2
96.5
96.7
2.7
-0.50
146
2.3
-0.41
19.5
76.9
96.6
101.2
97.4
96.7
2.7
-0.55
146
2.4
-0.46
20.9
77.7
97.6
101.1
97.9
96.8
Cost/income
Leverage (x)
Valuation data
PE (diluted EPS)
P/PPOP
P/BVPS
Dividend yield (%)
P/Deposit
P/Asset
47.3
31.9
1.7
13.9
15.1
8.1
48.4
31.8
1.3
11.0
12.0
8.6
48.3
31.1
1.3
11.3
12.2
9.0
46.6
30.3
1.3
12.2
13.1
9.3
7.4
5.8
1.0
6.5
0.2
0.1
8.7
5.5
0.9
5.2
0.1
0.1
8.0
5.1
0.9
5.6
0.1
0.1
6.9
4.4
0.8
6.5
0.1
0.1
Growth (y-o-y %)
Net interest income
Non-interest income
Operating expense
PPOP
Provisions
PBT
PAT
Net loans
Total assets
RWA
Customer deposits
Ratios (%)
NIM
Gross yield
Cost of funds
Spread
Issuer information
Share price
(OMR)
0.27
Reuters (Equity)
NBO.OM
Market cap (USDm)
777
Free float (%)
Country
Oman
Analyst
Vikram Viswanathan
Target price
(OMR)
Bloomberg (Equity)
Market cap (OMRm)
Sector
Contact
0.32
1
(%) 5
.
6
NBOB OM
299
COMMERCIAL BANKS
+971 4 423 6931
abc
Commercial Banks
MENA and Turkey
17 July 2013
Financials & valuation: Qatar Islamic Bank
Year to
P&L summary (QARm)
Net Interest Income
Non-interest Income
Net fees/commission
Trading profits
Other
Operating expense
Staff costs
Other oper expenese
PPOP
Provisions
Bad debt
Other
HSBC PBT
Exceptionals
Profit-before tax
Taxation
PAT
Attributable profit
Total assets
Other assets
Total Liabilities
Customer deposits
Other liabilities
Total capital
Ordinary equity
IEA (avg)
IBL (avg)
RWA (QARm)
Total tier 1
Total Capital
EPS
DPS
NAV (tangible)
Net interest income
Other income
Operating income
Operating expenses
Staff costs
Other oper exp
PPOP
Provisions
Non-op items
PBT
Taxation
PAT
12/2012a
12/2013e
12/2014e
12/2015e
2,086
444
417
-48
75
2,530
-842
-484
-358
1,688
-502
-188
-314
-16
1,170
-42
1,128
-2
1,126
116
1,241
1,284
2,286
495
377
40
78
2,781
-937
-552
-385
1,844
-457
-211
-246
-16
1,370
0
1,370
0
1,370
-69
1,302
1,302
2,447
540
438
-5
107
2,987
-1,027
-606
-421
1,960
-395
-215
-180
-16
1,548
0
1,548
0
1,548
-77
1,471
1,471
2,758
650
539
-10
121
3,408
-1,127
-671
-456
2,281
-468
-287
-182
0
1,813
0
1,813
0
1,813
-91
1,722
1,722
73,192
43,137
11,356
18,698
60,141
43,147
5,416
11,578
11,474
11,474
0
58,882
51,325
81,072
49,889
11,356
19,826
67,536
50,482
5,416
11,638
11,890
11,890
0
70,469
62,602
89,914
57,736
11,356
20,822
75,677
58,560
5,416
11,702
12,514
12,514
0
78,288
70,308
100,866
67,458
11,356
22,052
85,699
68,515
5,416
11,768
13,354
13,354
0
87,794
79,324
63,102
14.4
15.1
73,829
12.9
13.5
85,642
11.8
12.3
100,201
10.8
11.2
5.25
5.43
3.75
48.56
48.56
5.51
5.51
3.58
50.32
50.32
6.22
6.22
3.73
52.96
52.96
7.29
7.29
4.37
56.51
56.51
3.2
4.1
-0.9
0.6
0.0
3.8
-1.3
-0.7
-0.5
2.6
-0.8
0.0
1.8
0.0
0.2
2.0
3.0
3.9
-1.0
0.5
0.2
3.6
-1.2
-0.7
-0.5
2.4
-0.6
0.0
1.8
0.0
-0.1
1.7
2.9
3.8
-0.9
0.5
0.1
3.5
-1.2
-0.7
-0.5
2.3
-0.5
0.0
1.8
0.0
-0.1
1.7
2.9
3.9
-1.0
0.6
0.1
3.6
-1.2
-0.7
-0.5
2.4
-0.5
0.0
1.9
0.0
-0.1
1.8
Neutral
Year to
12/2012a
12/2013e
12/2014e
12/2015e
18.3
10.4
12.2
19.3
157.4
-4.1
-6.1
9.6
11.5
11.2
9.2
-8.9
17.1
1.4
7.1
9.0
9.6
6.3
-13.5
13.0
13.0
12.7
20.5
9.7
16.4
18.4
17.1
17.1
45.8
25.6
53.5
56.0
15.7
10.8
17.0
17.0
15.7
10.9
16.0
16.0
16.8
12.2
17.0
17.0
3.54
4.55
1.20
3.34
3.24
4.25
1.22
3.03
3.13
4.12
1.18
2.94
3.14
4.21
1.24
2.96
NPL/gross loans
Credit cost
Coverage
NPL/RWA
Provision/RWA
NPL/NTA
Net loans/assets
RWA/assets
Loans/deposits
Avg IEA/avg assets
1.8
-0.51
61
1.5
-0.96
7.0
58.9
86.2
100.0
89.6
97.2
2.0
-0.45
72
1.5
-0.67
8.4
61.5
91.1
98.8
91.4
98.1
2.1
-0.39
78
1.5
-0.50
9.6
64.2
95.2
98.6
91.6
98.2
2.1
-0.45
85
1.6
-0.50
10.8
66.9
99.3
98.5
92.0
98.3
Cost/income
Leverage (x)
Valuation data
PE (diluted EPS)
P/PPOP
P/BVPS
Dividend yield (%)
P/Deposit
P/Asset
33.3
17.5
1.9
10.9
15.4
5.8
33.7
17.8
1.7
11.1
14.0
6.6
34.4
18.1
1.7
12.1
15.0
7.0
33.1
19.1
1.8
13.3
16.5
7.4
12.7
9.6
1.4
5.4
0.4
0.2
12.5
8.8
1.4
5.2
0.3
0.2
11.1
8.3
1.3
5.4
0.3
0.2
9.5
7.1
1.2
6.3
0.2
0.2
Growth (y-o-y %)
Net interest income
Non-interest income
Operating expense
PPOP
Provisions
PBT
PAT
Net loans
Total assets
RWA
Customer deposits
Ratios (%)
NIM
Gross yield
Cost of funds
Spread
Issuer information
Share price
(QAR)
68.90
Reuters (Equity)
QISB.QA
Market cap (USDm)
4,471
Free float (%)
Country
Qatar
Analyst
Vikram Viswanathan
Target price
(QAR)
Bloomberg (Equity)
Market cap (QARm)
Sector
Contact
75.00
9
(%) .
5
QIBK QD
16,280
COMMERCIAL BANKS
+971 4 423 6931
111
abc
Commercial Banks
MENA and Turkey
17 July 2013
Financials & valuation: Qatar National Bank
Year to
P&L summary (QARm)
Net Interest Income
Non-interest Income
Net fees/commission
Trading profits
Other
Operating expense
Staff costs
Other oper expenese
PPOP
Provisions
Bad debt
Other
HSBC PBT
Exceptionals
Profit-before tax
Taxation
PAT
Attributable profit
Total assets
Other assets
Total Liabilities
Customer deposits
Other liabilities
Total capital
Ordinary equity
IEA (avg)
IBL (avg)
RWA (QARm)
Total tier 1
Total Capital
EPS
DPS
NAV (tangible)
Net interest income
Other income
Operating income
Operating expenses
Staff costs
Other oper exp
PPOP
Provisions
Non-op items
PBT
Taxation
PAT
112
12/2012a
12/2013e
12/2014e
12/2015e
9,150
2,089
1,305
112
672
11,238
-1,932
-1,104
-828
9,306
-1,056
-1,056
0
230
8,480
0
8,480
-57
8,423
-84
8,339
8,339
11,282
2,857
1,864
154
840
14,139
-2,962
-1,769
-1,193
11,177
-1,665
-1,670
4
253
9,765
0
9,765
-231
9,533
-88
9,445
9,445
12,918
3,377
2,085
324
968
16,296
-3,314
-2,007
-1,307
12,982
-1,644
-1,649
5
279
11,616
0
11,616
-354
11,263
-105
11,158
11,158
14,892
3,736
2,306
341
1,089
18,628
-3,700
-2,264
-1,436
14,928
-1,702
-1,708
5
294
13,520
0
13,520
-413
13,107
-122
12,985
12,985
366,854
249,936
48,728
68,190
318,865
270,040
19,511
29,314
47,989
47,078
911
323,598
281,755
445,439
308,004
62,719
74,715
392,302
343,196
20,175
28,931
53,136
52,137
999
390,663
347,866
510,341
360,388
67,730
82,223
450,354
403,037
20,175
27,142
59,987
58,884
1,104
456,982
412,915
590,657
425,494
73,408
91,755
522,777
477,046
20,175
25,557
67,880
66,655
1,225
528,589
477,974
173,426
21.0
21.0
222,223
16.2
16.2
256,011
16.5
16.5
295,097
16.7
16.7
11.92
11.92
6.00
67.28
67.28
13.50
13.50
6.07
74.51
66.53
15.95
15.95
7.18
84.15
76.17
18.56
18.56
8.35
95.26
87.28
2.7
3.7
-1.0
0.4
0.2
3.4
-0.6
-0.3
-0.2
2.8
-0.3
0.1
2.5
0.0
0.0
2.5
2.8
3.9
-1.2
0.5
0.2
3.5
-0.7
-0.4
-0.3
2.8
-0.4
0.1
2.4
-0.1
0.0
2.3
2.7
3.7
-1.0
0.4
0.3
3.4
-0.7
-0.4
-0.3
2.7
-0.3
0.1
2.4
-0.1
0.0
2.3
2.7
3.7
-1.0
0.4
0.3
3.4
-0.7
-0.4
-0.3
2.7
-0.3
0.1
2.5
-0.1
0.0
2.4
Overweight
Year to
12/2012a
12/2013e
12/2014e
12/2015e
17.3
-5.9
20.8
10.5
1.9
11.9
11.1
23.3
36.8
53.3
20.1
57.7
15.1
13.3
14.5
18.2
11.9
16.1
-1.3
19.0
18.1
15.3
10.6
11.6
15.0
3.5
16.4
16.4
Growth (y-o-y %)
Net interest income
Non-interest income
Operating expense
PPOP
Provisions
PBT
PAT
Net loans
Total assets
RWA
Customer deposits
Ratios (%)
NIM
Gross yield
Cost of funds
Spread
28.9
21.5
10.9
34.9
23.2
21.4
28.1
27.1
17.0
14.6
15.2
17.4
18.1
15.7
15.3
18.4
2.83
3.81
1.13
2.68
2.89
4.10
1.36
2.74
2.83
3.90
1.19
2.71
2.82
3.90
1.20
2.70
NPL/gross loans
Credit cost
Coverage
NPL/RWA
Provision/RWA
NPL/NTA
Net loans/assets
RWA/assets
Loans/deposits
Avg IEA/avg assets
1.3
-0.47
115
2.0
-0.64
7.2
68.1
47.3
92.6
96.8
97.5
1.7
-0.59
116
2.7
-0.84
11.3
69.1
49.9
89.7
96.2
97.8
1.8
-0.48
118
2.7
-0.69
12.2
70.6
50.2
89.4
95.6
98.0
1.7
-0.42
124
2.7
-0.62
12.4
72.0
50.0
89.2
96.0
98.2
Cost/income
Leverage (x)
Valuation data
PE (diluted EPS)
P/PPOP
P/BVPS
Dividend yield (%)
P/Deposit
P/Asset
17.2
18.6
2.5
18.4
23.5
7.4
20.9
20.2
2.3
19.8
26.0
8.0
20.3
20.7
2.3
21.9
28.5
8.4
19.9
20.1
2.4
22.3
28.3
8.6
13.6
12.1
2.4
3.7
0.4
0.3
12.0
10.1
2.4
3.8
0.3
0.3
10.1
8.7
2.1
4.4
0.3
0.2
8.7
7.6
1.9
5.2
0.2
0.2
Issuer information
Share price
(QAR)
161.50
Reuters (Equity)
QNBK.QA
Market cap (USDm)
31,036
Free float (%)
Country
Qatar
Analyst
Vikram Viswanathan
Target price
(QAR)
Bloomberg (Equity)
Market cap (QARm)
Sector
Contact
200.00
1
(%) 3
.
8
QNBK QD
113,006
COMMERCIAL BANKS
+971 4 423 6931
abc
Commercial Banks
MENA and Turkey
17 July 2013
Financials & valuation: Riyad Bank
Year to
P&L summary (SARm)
Net Interest Income
Non-interest Income
Net fees/commission
Trading profits
Other
Operating expense
Staff costs
Other oper expenese
PPOP
Provisions
Bad debt
Other
HSBC PBT
Exceptionals
Profit-before tax
Taxation
PAT
Attributable profit
Total assets
Other assets
Total Liabilities
Customer deposits
Other liabilities
Total capital
Ordinary equity
IEA (avg)
IBL (avg)
RWA (SARm)
Total tier 1
Total Capital
EPS
DPS
NAV (tangible)
Net interest income
Other income
Operating income
Operating expenses
Staff costs
Other oper exp
PPOP
Provisions
Non-op items
PBT
Taxation
PAT
12/2012a
12/2013e
12/2014e
Neutral
12/2015e
4,381
2,405
1,777
-6
633
6,786
-2,350
-1,186
-1,164
4,436
-970
-1,180
209
0
3,466
0
3,466
-150
3,316
0
3,316
3,316
4,427
2,573
1,860
0
713
7,000
-2,483
-1,260
-1,223
4,517
-858
-928
70
0
3,659
0
3,659
-158
3,501
0
3,501
3,501
4,783
2,682
2,046
0
636
7,465
-2,620
-1,336
-1,284
4,844
-945
-998
53
0
3,899
0
3,899
-169
3,731
0
3,731
3,731
5,632
2,896
2,279
0
617
8,528
-2,792
-1,431
-1,361
5,736
-1,237
-1,295
58
0
4,499
0
4,499
-195
4,304
0
4,304
4,304
190,181
117,471
36,254
36,456
159,342
146,215
0
13,128
30,839
30,839
0
178,242
149,221
190,566
123,463
32,326
34,777
158,276
146,215
0
12,061
32,242
32,242
0
183,260
152,378
205,331
133,917
33,628
37,786
171,494
159,374
0
12,120
33,764
33,764
0
190,614
158,957
231,039
153,968
34,986
42,085
195,417
183,237
0
12,180
35,544
35,544
0
210,641
177,468
184,754
15.3
17.7
190,900
15.6
17.8
205,600
15.2
17.3
231,553
14.3
16.2
2.16
2.16
1.30
20.56
20.56
2.30
2.30
1.37
21.49
21.49
2.45
2.45
1.46
22.51
22.51
2.83
2.83
1.68
23.70
23.70
4.9
3.3
1.6
1.0
-2.2
3.7
-1.3
-0.6
-0.6
2.4
-0.6
0.0
1.8
-0.1
0.0
1.7
5.0
3.5
1.5
1.0
-2.3
3.7
-1.3
-0.7
-0.6
2.4
-0.5
0.0
1.9
-0.1
0.0
1.8
3.7
2.9
0.7
1.0
-0.9
3.8
-1.3
-0.7
-0.6
2.4
-0.5
0.0
1.9
-0.1
0.0
1.9
2.6
2.2
0.3
1.0
0.3
3.9
-1.3
-0.7
-0.6
2.6
-0.6
0.0
2.0
-0.1
0.0
1.9
Year to
12/2012a
12/2013e
12/2014e
12/2015e
4.4
15.7
-6.4
17.8
57.4
10.1
10.6
1.0
7.0
5.7
1.8
-11.6
5.6
5.6
8.0
4.2
5.5
7.2
10.2
6.6
6.6
17.8
8.0
6.5
18.4
31.0
15.4
15.4
Growth (y-o-y %)
Net interest income
Non-interest income
Operating expense
PPOP
Provisions
PBT
PAT
Net loans
Total assets
RWA
Customer deposits
Ratios (%)
NIM
Gross yield
Cost of funds
Spread
4.0
5.1
2.0
4.6
5.1
0.2
3.3
0.0
8.5
7.7
7.7
9.0
15.0
12.5
12.6
15.0
2.46
2.90
0.52
2.37
2.42
2.90
0.58
2.32
2.51
3.20
0.83
2.37
2.67
3.82
1.36
2.46
NPL/gross loans
Credit cost
Coverage
NPL/RWA
Provision/RWA
NPL/NTA
Net loans/assets
RWA/assets
Loans/deposits
Avg IEA/avg assets
1.7
-0.83
125
1.1
-0.53
6.6
61.8
97.1
80.3
96.1
95.9
1.6
-0.70
139
1.1
-0.46
6.4
64.8
100.2
84.4
96.3
96.0
1.4
-0.72
158
1.0
-0.48
5.7
65.2
100.1
84.0
96.3
96.4
1.6
-0.84
135
1.2
-0.57
7.2
66.6
100.2
84.0
96.5
96.7
Cost/income
Leverage (x)
Valuation data
PE (diluted EPS)
P/PPOP
P/BVPS
Dividend yield (%)
P/Deposit
P/Asset
34.6
35.4
1.8
11.1
12.0
6.2
35.5
36.8
1.8
11.1
12.1
6.0
35.1
35.9
1.9
11.3
12.2
6.0
32.7
34.0
2.0
12.4
13.4
6.3
11.2
8.4
1.2
5.3
0.3
0.2
10.6
8.2
1.1
5.5
0.3
0.2
9.9
7.6
1.1
5.9
0.2
0.2
8.6
6.5
1.0
6.8
0.2
0.2
Issuer information
Share price
(SAR)
Reuters (Equity)
Market cap (USDm)
Free float (%)
Country
Analyst
24.70
1010.SE
9,878
31
Saudi Arabia
Aybek Islamov
Target price
(SAR)
Bloomberg (Equity)
Market cap (SARm)
Sector
Contact
27.00
8
(%) .
7
RIBL AB
37,050
COMMERCIAL BANKS
+9714 423 6921
113
abc
Commercial Banks
MENA and Turkey
17 July 2013
Financials & valuation: Samba Financial Group
Year to
P&L summary (SARm)
Net Interest Income
Non-interest Income
Net fees/commission
Trading profits
Other
Operating expense
Staff costs
Other oper expenese
PPOP
Provisions
Bad debt
Other
HSBC PBT
Exceptionals
Profit-before tax
Taxation
PAT
Attributable profit
Total assets
Other assets
Total Liabilities
Customer deposits
Other liabilities
Total capital
Ordinary equity
IEA (avg)
IBL (avg)
RWA (SARm)
Total tier 1
Total Capital
EPS
DPS
NAV (tangible)
Net interest income
Other income
Operating income
Operating expenses
Staff costs
Other oper exp
PPOP
Provisions
Non-op items
PBT
Taxation
PAT
114
12/2012a
12/2013e
12/2014e
12/2015e
4,273
2,421
1,693
185
543
6,694
-2,063
-1,215
-848
4,631
-299
-299
0
0
4,332
0
4,332
-368
3,964
-2
3,962
3,962
4,462
2,821
2,027
170
623
7,283
-2,132
-1,242
-891
5,151
-674
-674
0
0
4,476
0
4,476
-380
4,096
-2
4,094
4,094
5,193
2,852
2,303
0
549
8,045
-2,254
-1,310
-944
5,790
-790
-790
0
0
5,000
0
5,000
-425
4,575
-2
4,573
4,573
6,403
3,174
2,598
0
577
9,577
-2,400
-1,389
-1,010
7,178
-848
-848
0
0
6,330
0
6,330
-538
5,792
-3
5,789
5,789
199,224
104,786
52,576
41,862
168,530
148,736
0
19,794
29,174
29,174
0
185,765
159,289
220,596
124,694
50,662
45,241
187,284
168,072
0
19,212
31,911
31,911
0
198,607
170,540
250,415
143,609
52,715
54,090
214,177
194,964
0
19,214
35,020
35,020
0
222,582
193,833
283,366
165,487
55,796
62,083
243,425
224,208
0
19,217
39,122
39,122
0
251,058
221,901
166,670
19.0
20.0
192,563
17.4
18.2
216,839
16.8
17.5
245,148
16.3
17.0
4.40
4.40
1.63
32.42
32.42
4.55
4.55
1.64
35.46
35.46
5.08
5.08
1.83
38.91
38.91
6.43
6.43
2.32
43.47
43.47
6.0
4.3
1.8
0.9
-3.5
3.4
-1.1
-0.6
-0.4
2.4
-0.2
0.0
2.2
-0.2
0.0
2.0
5.6
4.0
1.6
1.0
-3.1
3.5
-1.0
-0.6
-0.4
2.5
-0.3
0.0
2.1
-0.2
0.0
2.0
3.2
2.7
0.5
1.0
-0.8
3.4
-1.0
-0.6
-0.4
2.5
-0.3
0.0
2.1
-0.2
0.0
1.9
2.2
1.9
0.2
1.0
0.4
3.6
-0.9
-0.5
-0.4
2.7
-0.3
0.0
2.4
-0.2
0.0
2.2
Overweight
Year to
12/2012a
12/2013e
12/2014e
12/2015e
-0.8
7.4
5.5
0.5
-0.9
0.6
-4.6
4.4
16.5
3.3
11.2
125.8
3.3
3.3
16.4
1.1
5.7
12.4
17.2
11.7
11.7
23.3
11.3
6.4
24.0
7.3
26.6
26.6
Net loans
Total assets
RWA
Customer deposits
Ratios (%)
NIM
Gross yield
Cost of funds
Spread
17.6
3.3
6.8
8.4
19.0
10.7
15.5
13.0
15.2
13.5
12.6
16.0
15.2
13.2
13.1
15.0
2.30
2.57
0.31
2.26
2.25
2.53
0.32
2.20
2.33
2.85
0.60
2.26
2.55
3.55
1.13
2.42
NPL/gross loans
Credit cost
Coverage
NPL/RWA
Provision/RWA
NPL/NTA
Net loans/assets
RWA/assets
Loans/deposits
Avg IEA/avg assets
2.2
-0.30
133
1.5
-0.19
8.0
52.6
83.7
70.5
94.8
95.4
2.2
-0.57
133
1.5
-0.38
8.7
56.5
87.3
74.2
94.6
95.9
2.0
-0.57
148
1.4
-0.39
8.4
57.3
86.6
73.7
94.5
96.6
2.0
-0.53
149
1.5
-0.37
8.7
58.4
86.5
73.8
94.1
97.0
Cost/income
Leverage (x)
Valuation data
PE (diluted EPS)
P/PPOP
P/BVPS
Dividend yield (%)
P/Deposit
P/Asset
30.8
36.2
2.0
13.7
13.2
6.9
29.3
38.7
2.0
12.8
12.6
6.9
28.0
35.5
1.9
13.2
13.1
7.0
25.1
33.1
2.2
15.2
15.2
7.2
11.4
9.8
1.6
3.2
0.3
0.2
11.0
8.8
1.4
3.3
0.3
0.2
9.9
7.8
1.3
3.6
0.2
0.2
7.8
6.3
1.2
4.6
0.2
0.2
Growth (y-o-y %)
Net interest income
Non-interest income
Operating expense
PPOP
Provisions
PBT
PAT
Issuer information
Share price
(SAR)
Reuters (Equity)
Market cap (USDm)
Free float (%)
Country
Analyst
50.25
1090.SE
12,057
51
Saudi Arabia
Aybek Islamov
Target price
(SAR)
Bloomberg (Equity)
Market cap (SARm)
Sector
Contact
67.00
3
(%) 0
.
1
SAMBA AB
45,225
Commercial Banks
+9714 423 6921
abc
Commercial Banks
MENA and Turkey
17 July 2013
Financials & valuation: Union National Bank
Year to
P&L summary (AEDm)
Net Interest Income
Non-interest Income
Net fees/commission
Trading profits
Other
Operating expense
Staff costs
Other oper expenese
PPOP
Provisions
Bad debt
Other
HSBC PBT
Exceptionals
Profit-before tax
Taxation
PAT
Attributable profit
Total assets
Other assets
Total Liabilities
Customer deposits
Other liabilities
Total capital
Ordinary equity
IEA (avg)
IBL (avg)
RWA (SARm)
Total tier 1
Total Capital
EPS
DPS
NAV (tangible)
Net interest income
Other income
Operating income
Operating expenses
Staff costs
Other oper exp
PPOP
Provisions
Non-op items
PBT
Taxation
PAT
12/2012a
12/2013e
12/2014e
12/2015e
2,539
552
437
89
27
3,091
-787
-510
-277
2,304
-671
-671
1
0
1,633
-4
1,629
-27
1,602
-118
1,484
1,488
2,634
566
444
72
51
3,201
-803
-512
-291
2,397
-564
-564
0
0
1,833
0
1,833
-18
1,815
-118
1,697
1,697
2,699
623
472
46
106
3,323
-828
-522
-306
2,494
-535
-535
0
0
1,959
0
1,959
-20
1,940
-118
1,822
1,822
2,765
633
501
21
111
3,398
-859
-538
-321
2,539
-633
-633
0
0
1,907
0
1,907
-19
1,888
-118
1,770
1,770
87,138
57,344
4,701
25,093
75,161
63,438
7,807
3,916
11,977
11,977
0
80,955
71,307
92,544
61,768
4,885
25,892
79,245
68,523
6,307
4,414
13,300
13,300
0
85,772
75,008
101,693
68,169
5,075
28,448
86,995
75,664
6,307
5,024
14,697
14,697
0
92,839
80,863
111,645
75,201
5,274
31,170
95,633
83,554
6,307
5,772
16,012
16,012
0
101,575
88,994
74,962
18.5
23.2
80,759
18.8
20.9
88,852
18.7
20.6
97,784
18.3
20.1
0.57
0.57
0.14
4.57
4.57
0.65
0.65
0.16
5.08
5.08
0.70
0.70
0.17
5.61
5.61
0.68
0.68
0.17
6.11
6.11
3.0
4.7
-1.7
0.5
0.1
3.6
-0.9
-0.6
-0.3
2.7
-0.8
0.0
1.9
0.0
-0.1
1.8
2.9
4.3
-1.4
0.5
0.1
3.6
-0.9
-0.6
-0.3
2.7
-0.6
0.0
2.0
0.0
-0.1
1.9
2.8
3.9
-1.2
0.5
0.2
3.4
-0.9
-0.5
-0.3
2.6
-0.6
0.0
2.0
0.0
-0.1
1.9
2.6
4.1
-1.5
0.5
0.1
3.2
-0.8
-0.5
-0.3
2.4
-0.6
0.0
1.8
0.0
-0.1
1.7
Neutral
Year to
12/2012a
12/2013e
12/2014e
12/2015e
6.2
23.2
8.0
9.2
13.2
7.7
8.3
3.8
2.5
2.1
4.0
-16.0
12.3
14.1
2.5
10.1
3.1
4.1
-5.1
6.9
7.4
2.4
1.5
3.7
1.8
18.2
-2.7
-2.9
Growth (y-o-y %)
Net interest income
Non-interest income
Operating expense
PPOP
Provisions
PBT
PAT
Net loans
Total assets
RWA
Customer deposits
Ratios (%)
NIM
Gross yield
Cost of funds
Spread
-0.4
5.7
-2.2
5.2
7.7
6.2
7.7
8.0
10.4
9.9
10.0
10.4
10.3
9.8
10.1
10.4
3.14
4.91
2.01
2.90
3.07
4.50
1.63
2.87
2.91
4.11
1.38
2.73
2.72
4.27
1.77
2.50
NPL/gross loans
Credit cost
Coverage
NPL/RWA
Provision/RWA
NPL/NTA
Net loans/assets
RWA/assets
Loans/deposits
Avg IEA/avg assets
4.7
-1.13
79
3.7
-0.88
23.1
65.8
86.0
90.4
95.5
97.2
4.5
-0.91
87
3.7
-0.72
21.8
66.7
87.3
90.1
95.5
97.2
4.6
-0.79
86
3.9
-0.63
22.2
67.0
87.4
90.1
95.6
97.3
4.3
-0.85
96
3.6
-0.68
20.8
67.4
87.6
90.0
95.2
97.5
Cost/income
Leverage (x)
Valuation data
PE (diluted EPS)
P/PPOP
P/BVPS
Dividend yield (%)
P/Deposit
P/Asset
25.5
17.9
1.8
13.0
11.2
7.4
25.1
17.7
1.9
13.4
11.7
7.1
24.9
18.8
1.9
13.0
11.5
6.9
25.3
18.6
1.7
11.5
10.3
6.9
8.3
5.3
1.0
3.0
0.2
0.1
7.3
5.1
0.9
3.4
0.2
0.1
6.8
4.9
0.8
3.7
0.2
0.1
7.0
4.9
0.8
3.6
0.1
0.1
Issuer information
Share price
(AED)
4.70
Reuters (Equity)
UNB.AD
Market cap (USDm)
3,353
Free float (%)
Country
Analyst
Aybek Islamov
Target price
(AED)
Bloomberg (Equity)
Market cap (AEDm)
Sector
Contact
5.20
6
(%) .
3
UNB UH
12,316
COMMERCIAL BANKS
+9714 423 6921
115
abc
Commercial Banks
MENA and Turkey
17 July 2013
Financials & valuation: Akbank
Overweight
Financial statements
Year to
Core profitability (% RWAs) and leverage
12/2012a
12/2013e
12/2014e
12/2015e
5,200
1,735
400
378
7,713
-2,898
-657
-450
3,708
95
3,803
-853
0
2,950
2,855
5,899
2,190
457
316
8,863
-3,364
-1,032
-460
4,006
-104
3,902
-878
0
3,024
3,128
6,501
2,447
308
471
9,726
-3,672
-1,157
-408
4,490
50
4,540
-976
0
3,564
3,514
7,401
2,819
127
573
10,920
-4,011
-1,342
-493
5,074
50
5,124
-1,102
0
4,022
3,972
21,913
21,913
87,656
46,109
86,105
140,655
155,854
23,061
23,061
107,977
38,285
97,759
159,623
171,428
26,020
26,020
129,023
37,767
113,366
179,346
195,410
29,329
29,329
154,304
37,007
131,441
205,191
223,969
119,091
17.0
18.6
145,442
15.6
17.1
170,523
15.0
16.5
200,298
14.4
15.9
P&L summary (TRYm)
Net interest income
Net fees/commissions
Trading profits
Other income
Total income
Operating expense
Bad debt charge
Other
HSBC PBT
Exceptionals
PBT
Taxation
Minorities + preferences
Attributable profit
Balance sheet summary (TRYm)
Ordinary equity
HSBC ordinary equity
Customer loans
Debt securities holdings
Customer deposits
Interest earning assets
Total assets
Capital (%)
RWA (TRYm)
Total tier 1
Total capital
Year to
Net interest income
Trading profits
Total income
Other income
Operating expense
Pre-provision profit
Bad debt charge
Leverage (x)
Return on average equity
Year to
12/2012a
12/2013e
12/2014e
12/2015e
28.6
19.0
35.1
23.2
23.6
-26.7
24.8
14.9
16.1
14.2
2.5
9.6
36.5
5.2
9.7
9.2
10.1
17.8
12.3
6.0
12.8
12.3
9.2
14.1
12.9
13.1
17.8
12.7
37.6
0.8
101.8
1.3
0.9
0.9
0.5
91.7
14.5
38.0
1.1
110.5
1.7
1.3
1.2
0.1
92.9
13.9
37.8
1.0
113.8
2.0
1.5
1.4
0.1
92.9
14.3
36.7
0.9
117.4
2.3
1.8
1.6
0.1
90.0
14.4
0.74
0.71
0.10
5.48
5.48
0.76
0.78
0.14
5.77
5.77
0.89
0.88
0.15
6.50
6.50
1.01
0.99
0.18
7.33
7.33
Year-on-year % change
Total income
Operating expense
EPS
HSBC EPS
DPS
NAV (including goodwill)
Ratios (%)
Cost/income ratio
Bad debt charge
Customer loans/deposits
NPL/loan
NPL/RWA
Provision to risk assets/RWA
Net write-off/RWA
Coverage
ROE (including goodwill)
Per share data (TRY)
EPS reported (fully diluted)
DPS
NAV
116
12/2013e
12/2014e
12/2015e
4.6
1.5
0.4
6.8
0.3
-2.6
4.2
-0.6
2.5
5.8
14.5
4.5
1.7
0.3
6.7
0.2
-2.5
4.2
-0.8
2.4
5.9
13.9
4.1
1.5
0.2
6.2
0.3
-2.3
3.8
-0.7
2.2
6.4
14.3
4.0
1.5
0.1
5.9
0.3
-2.2
3.7
-0.7
2.1
6.7
14.4
12/2012a
12/2013e
12/2014e
12/2015e
9.6
5.7
1.3
7.6
1.5
8.8
5.0
1.2
4.7
2.1
7.8
4.5
1.1
6.4
2.2
6.9
4.0
0.9
6.9
2.6
Valuation data
Year to
PE
Pre-provision multiple
P/NAV
Equity cash flow yield (%)
Dividend yield (%)
Issuer information
Share price (TRY)
Reuters (Equity)
Market cap (USDm)
Free float (%)
Country
Analyst
6.88
AKBNK.IS
14,071
25
Turkey
Tamer Sengun
Ratio, growth & per share analysis
12/2012a
Target price (TRY)
Bloomberg (Equity)
Market cap (TRYm)
Sector
Contact
9.30
3
0
.
6
AKBNK TI
27,520
Commercial Banks
+90 212 376 4615
abc
Commercial Banks
MENA and Turkey
17 July 2013
Financials & valuation: Garanti Bankasi
Year to
12/2012a
12/2013e
12/2014e
12/2015e
5,719
2,008
614
268
8,609
-3,541
-764
-414
3,891
33
3,923
-853
0
3,070
3,038
6,345
2,416
468
321
9,549
-3,922
-962
-415
4,250
-105
4,145
-878
0
3,267
3,372
6,799
2,687
517
409
10,412
-4,320
-991
-408
4,694
55
4,749
-950
0
3,799
3,744
7,826
2,978
434
501
11,739
-4,729
-1,198
-487
5,326
55
5,381
-1,076
0
4,304
4,249
21,309
21,309
91,824
38,423
87,482
146,722
160,192
22,801
22,801
111,487
37,484
103,984
162,646
179,417
25,946
25,946
131,264
37,881
121,831
184,017
203,062
29,111
29,111
154,716
38,282
142,961
209,406
231,230
119,936
16.4
18.2
142,887
15.6
17.0
166,230
15.3
16.6
192,834
14.9
16.2
P&L summary (TRYm)
Net interest income
Trading profits
Other income
Total income
Operating expense
Bad debt charge
Other
HSBC PBT
Exceptionals
PBT
Taxation
Attributable profit
Ordinary equity
Customer loans
Customer deposits
Total assets
Capital (%)
RWA (TRYm)
Total tier 1
Total capital
Overweight
Year to
Net interest income
Trading profits
Total income
Other income
Operating expense
Bad debt charge
Leverage (x)
12/2012a
12/2013e
12/2014e
12/2015e
4.9
1.7
0.5
7.3
0.2
-3.0
4.3
-0.6
2.6
6.0
15.6
4.8
1.8
0.4
7.3
0.2
-3.0
4.3
-0.7
2.6
6.0
15.3
4.4
1.7
0.3
6.7
0.3
-2.8
3.9
-0.6
2.4
6.3
15.4
4.4
1.7
0.2
6.5
0.3
-2.6
3.9
-0.7
2.4
6.5
15.4
12/2012a
9.9
5.9
1.4
9.0
2.0
12/2013e
8.9
5.3
1.3
5.9
2.0
12/2014e
8.0
4.9
1.2
7.0
2.2
12/2015e
7.1
4.3
1.0
8.0
3.8
Valuation data
Year to
PE
P/NAV
Dividend yield (%)
Issuer information
Share price (TRY)
Reuters (Equity)
Market cap (USDm)
Free float (%)
Country
Analyst
7.14
GARAN.IS
15,333
49
Turkey
Tamer Sengun
Target price (TRY)
Bloomberg (Equity)
Market cap (TRYm)
Sector
Contact
10.00
3
7
.
0
GARAN TI
29,988
COMMERCIAL BANKS
+90 212 376 4615
Year to
12/2012a
12/2013e
12/2014e
12/2015e
13.6
10.4
16.0
0.0
8.1
5.3
21.2
10.9
10.8
11.0
6.4
11.0
-0.6
7.0
9.0
10.1
8.3
16.3
11.0
9.5
13.8
12.7
9.5
15.1
13.3
13.5
74.4
12.2
41.1
0.9
105.0
2.3
1.8
1.4
0.1
80.9
15.6
41.1
0.9
107.2
2.3
1.9
1.5
0.2
81.1
15.3
41.5
0.8
107.7
2.4
1.9
1.5
0.2
80.0
15.4
40.3
0.8
108.2
2.4
2.0
1.6
0.2
80.0
15.4
0.73
0.72
0.14
5.07
5.07
0.78
0.80
0.14
5.43
5.43
0.90
0.89
0.16
6.18
6.18
1.02
1.01
0.27
6.93
6.93
Total income
Operating expense
EPS
HSBC EPS
DPS
Ratios (%)
Cost/income ratio
Bad debt charge
NPL/loan
NPL/RWA
Net write-off/RWA
Coverage
DPS
NAV
117
abc
Commercial Banks
MENA and Turkey
17 July 2013
Financials & valuation: IS Bankasi
Overweight
Year to
12/2012a
12/2013e
12/2014e
12/2015e
5,928
1,706
590
1,540
9,764
-4,044
-601
-558
4,561
-440
4,121
-811
0
3,310
3,750
6,579
2,051
248
1,715
10,593
-4,474
-1,556
-587
3,976
-138
3,838
-765
0
3,074
3,212
7,241
2,314
101
1,799
11,456
-4,934
-1,527
-600
4,395
0
4,395
-967
0
3,428
3,428
8,140
2,640
52
2,042
12,873
-5,439
-1,801
-706
4,927
0
4,927
-1,084
0
3,843
3,843
22,719
22,719
107,142
38,673
105,383
155,784
175,444
23,475
23,475
127,639
37,715
117,814
171,773
198,083
26,812
26,812
150,009
37,224
135,086
194,172
223,687
29,970
29,970
176,393
36,748
154,890
220,799
254,291
151,514
13.0
16.3
178,472
12.4
15.5
205,834
12.1
15.0
239,043
11.8
14.4
P&L summary (TRYm)
Net interest income
Trading profits
Other income
Total income
Operating expense
Bad debt charge
Other
HSBC PBT
Exceptionals
PBT
Taxation
Attributable profit
Ordinary equity
Customer loans
Customer deposits
Total assets
Capital (%)
RWA (TRYm)
Total tier 1
Total capital
Year to
Net interest income
Trading profits
Total income
Other income
Operating expense
Bad debt charge
Leverage (x)
Year to
12/2012a
12/2013e
12/2014e
12/2015e
20.5
16.2
23.8
24.1
44.0
-21.5
26.8
8.5
10.6
7.0
-7.1
-14.4
22.6
3.3
8.1
10.3
6.6
11.5
6.7
-7.6
14.2
12.4
10.2
14.0
12.1
12.1
11.5
11.8
41.4
0.6
101.7
1.9
1.3
1.1
0.2
78.9
18.5
42.2
1.3
108.3
2.1
1.5
1.2
0.2
77.0
13.9
43.1
1.1
111.0
2.2
1.6
1.2
0.2
76.0
13.6
42.3
1.1
113.9
2.3
1.7
1.3
0.2
75.0
13.5
0.74
0.83
0.12
5.05
5.05
0.68
0.71
0.15
5.22
5.22
0.76
0.76
0.14
5.96
5.96
0.85
0.85
0.15
6.66
6.66
Total income
Operating expense
EPS
HSBC EPS
DPS
Ratios (%)
Cost/income ratio
Bad debt charge
NPL/loan
NPL/RWA
Net write-off/RWA
Coverage
DPS
NAV
118
12/2013e
12/2014e
12/2015e
4.2
1.2
0.4
6.9
1.1
-2.8
4.0
-0.4
2.6
7.0
18.5
4.0
1.2
0.2
6.4
1.0
-2.7
3.7
-0.9
1.9
7.1
13.9
3.8
1.2
0.1
6.0
0.9
-2.6
3.4
-0.8
1.8
7.6
13.6
3.7
1.2
0.0
5.8
0.9
-2.4
3.3
-0.8
1.7
7.8
13.5
12/2012a
12/2013e
12/2014e
12/2015e
6.0
3.9
1.0
10.8
2.4
7.0
3.7
1.0
5.9
3.0
6.5
3.4
0.8
6.7
2.7
5.8
3.0
0.7
6.8
3.1
Valuation data
Year to
PE
P/NAV
Dividend yield (%)
Issuer information
Share price (TRY)
Reuters (Equity)
Market cap (USDm)
Free float (%)
Country
Analyst
4.98
ISCTR.IS
11,458
30
Turkey
Tamer Sengun
12/2012a
Target price (TRY)
Bloomberg (Equity)
Market cap (TRYm)
Sector
Contact
6.20
2
1
.
1
ISCTR TI
22,410
COMMERCIAL BANKS
+90 212 376 4615
abc
Commercial Banks
MENA and Turkey
17 July 2013
Financials & valuation: Halkbank
Overweight
Year to
12/2012a
12/2013e
12/2014e
12/2015e
4,476
858
555
424
6,313
-2,098
-383
-370
3,463
-134
3,329
-734
0
2,595
2,730
4,846
1,037
459
478
6,819
-2,561
-554
-305
3,399
-67
3,332
-686
0
2,646
2,713
5,326
1,244
294
644
7,509
-2,819
-808
-298
3,584
0
3,584
-717
0
2,867
2,867
6,012
1,493
136
545
8,186
-3,093
-738
-342
4,012
0
4,012
-802
0
3,210
3,210
12,323
12,323
65,894
22,954
79,974
94,389
108,282
14,138
14,138
80,003
23,451
90,363
111,545
124,846
16,476
16,476
94,616
23,397
102,229
128,150
141,907
19,113
19,113
110,767
24,073
115,655
146,035
161,499
79,194
14.3
16.2
96,205
14.0
15.8
112,044
14.1
15.9
129,271
14.3
16.0
P&L summary (TRYm)
Net interest income
Trading profits
Other income
Total income
Operating expense
Bad debt charge
Other
HSBC PBT
Exceptionals
PBT
Taxation
Attributable profit
Ordinary equity
Customer loans
Customer deposits
Total assets
Capital (%)
RWA (TRYm)
Total tier 1
Total capital
Year to
Net interest income
Trading profits
Total income
Other income
Operating expense
Bad debt charge
Leverage (x)
12/2012a
12/2013e
12/2014e
12/2015e
6.2
1.2
0.8
8.7
0.6
-2.9
5.8
-0.5
3.8
6.9
26.0
5.5
1.2
0.5
7.8
0.5
-2.9
4.9
-0.6
3.1
6.6
20.5
5.1
1.2
0.3
7.2
0.6
-2.7
4.5
-0.8
2.8
6.8
18.7
5.0
1.2
0.1
6.8
0.5
-2.6
4.2
-0.6
2.7
6.8
18.0
12/2012a
12/2013e
12/2014e
12/2015e
6.6
4.3
1.5
9.7
2.2
6.7
4.3
1.3
8.4
2.5
6.3
3.9
1.1
9.7
2.9
5.6
3.6
0.9
11.1
3.2
Valuation data
Year to
PE
P/NAV
Dividend yield (%)
Issuer information
Share price (TRY)
Reuters (Equity)
Market cap (USDm)
Free float (%)
Country
Analyst
14.50
HALKB.IS
9,267
25
Turkey
Tamer Sengun
Target price (TRY)
Bloomberg (Equity)
Market cap (TRYm)
Sector
Contact
23.00
5
7
.
0
HALKB TI
18,125
COMMERCIAL BANKS
+90 212 376 4615
Year to
12/2012a
12/2013e
12/2014e
12/2015e
25.0
21.6
26.7
26.9
22.3
0.0
42.6
8.0
22.1
1.0
1.9
-0.6
16.7
14.7
10.1
10.1
10.1
8.4
5.7
14.7
16.5
9.0
9.7
8.6
12.0
12.0
8.4
16.0
33.2
0.6
82.4
2.9
2.5
2.0
0.0
82.5
26.0
37.6
0.8
88.5
2.9
2.5
2.0
0.0
82.1
20.5
37.5
0.9
92.6
3.1
2.7
2.2
0.0
81.1
18.7
37.8
0.7
95.8
3.3
2.9
2.3
0.0
80.0
18.0
2.08
2.18
0.32
9.86
9.86
2.12
2.17
0.37
11.31
11.31
2.29
2.29
0.42
13.18
13.18
2.57
2.57
0.46
15.29
15.29
Total income
Operating expense
EPS
HSBC EPS
DPS
Ratios (%)
Cost/income ratio
Bad debt charge
NPL/loan
NPL/RWA
Net write-off/RWA
Coverage
DPS
NAV
119
abc
Commercial Banks
MENA and Turkey
17 July 2013
Financials & valuation: Vakifbank
Overweight
Year to
12/2012a
12/2013e
12/2014e
12/2015e
3,907
448
337
682
5,373
-2,261
-735
-449
1,928
-43
1,885
-425
0
1,459
1,502
4,486
724
161
808
6,179
-2,536
-1,369
-428
1,846
-62
1,784
-359
0
1,426
1,487
4,690
868
117
955
6,630
-2,798
-1,373
-418
2,041
0
2,041
-408
0
1,633
1,633
5,326
999
-27
1,117
7,414
-3,080
-1,653
-484
2,197
0
2,197
-439
0
1,758
1,758
11,918
11,918
68,133
18,467
67,242
91,382
104,580
12,632
12,632
81,822
19,135
76,446
106,057
121,276
14,203
14,203
94,079
19,323
85,586
120,878
135,764
15,797
15,797
108,225
19,198
95,815
135,642
152,344
83,813
12.3
16.1
100,862
11.5
14.7
114,165
11.5
14.5
129,894
11.3
14.1
P&L summary (TRYm)
Net interest income
Trading profits
Other income
Total income
Operating expense
Bad debt charge
Other
HSBC PBT
Exceptionals
PBT
Taxation
Attributable profit
Ordinary equity
Customer loans
Customer deposits
Total assets
Capital (%)
RWA (TRYm)
Total tier 1
Total capital
Year to
Net interest income
Trading profits
Total income
Other income
Operating expense
Bad debt charge
Leverage (x)
Year to
12/2012a
12/2013e
12/2014e
12/2015e
24.1
16.5
30.3
19.0
22.5
-100.0
28.2
15.0
12.2
17.1
-2.3
-1.0
6.0
7.3
10.3
5.2
14.5
9.8
-28.7
12.4
11.8
10.1
13.1
7.7
7.7
129.1
11.2
42.1
1.2
101.3
3.9
3.3
2.9
0.0
90.3
14.2
41.0
1.8
107.0
4.4
3.7
3.3
0.0
90.0
12.1
42.2
1.6
109.9
4.7
4.0
3.6
0.0
90.0
12.2
41.5
1.6
113.0
5.0
4.3
3.9
0.0
90.0
11.7
0.58
0.60
0.00
4.77
4.77
0.57
0.59
0.04
5.05
5.05
0.65
0.65
0.03
5.68
5.68
0.70
0.70
0.07
6.32
6.32
Total income
Operating expense
EPS
HSBC EPS
DPS
Ratios (%)
Cost/income ratio
Bad debt charge
NPL/loan
NPL/RWA
Net write-off/RWA
Coverage
DPS
NAV
120
12/2013e
12/2014e
12/2015e
5.0
0.6
0.4
6.9
0.9
-2.9
4.0
-0.9
1.9
7.3
14.2
4.9
0.8
0.2
6.7
0.9
-2.7
3.9
-1.5
1.6
7.5
12.1
4.4
0.8
0.1
6.2
0.9
-2.6
3.6
-1.3
1.5
8.0
12.2
4.4
0.8
0.0
6.1
0.9
-2.5
3.6
-1.4
1.4
8.1
11.7
12/2012a
12/2013e
12/2014e
12/2015e
6.8
3.3
0.9
6.6
0.0
6.8
2.8
0.8
2.9
1.0
6.2
2.6
0.7
6.9
0.7
5.8
2.3
0.6
6.5
1.6
Valuation data
Year to
PE
P/NAV
Dividend yield (%)
Issuer information
Share price (TRY)
Reuters (Equity)
Market cap (USDm)
Free float (%)
Country
Analyst
4.06
VAKBN.IS
5,190
25
Turkey
Tamer Sengun
12/2012a
Target price (TRY)
Bloomberg (Equity)
Market cap (TRYm)
Sector
Contact
5.30
2
5
.
6
VAKBN TI
10,150
COMMERCIAL BANKS
+90 212 376 4615
abc
Commercial Banks
MENA and Turkey
17 July 2013
Financials & valuation: Yapi Kredi Bankasi
Year to
12/2012a
12/2013e
12/2014e
12/2015e
4,417
1,761
-39
455
6,594
-2,993
-788
-337
2,476
-27
2,449
-536
0
1,913
1,940
4,625
2,080
-136
453
7,022
-3,249
-874
-288
2,611
-44
2,568
-533
0
2,035
2,078
5,366
2,371
-198
479
8,018
-3,599
-1,008
-276
3,134
0
3,134
-627
0
2,508
2,508
6,002
2,679
-190
537
9,028
-3,966
-1,027
-326
3,710
0
3,710
-742
0
2,968
2,968
16,862
16,862
75,769
21,388
68,044
106,332
122,180
17,877
17,877
89,264
20,282
78,525
120,038
137,868
20,080
20,080
104,041
20,190
90,167
136,253
155,617
22,672
22,672
121,321
20,773
103,531
154,545
176,730
119,009
10.8
16.3
138,990
10.7
15.4
159,900
10.7
14.9
183,928
10.7
14.5
P&L summary (TRYm)
Net interest income
Trading profits
Other income
Total income
Operating expense
Bad debt charge
Other
HSBC PBT
Exceptionals
PBT
Taxation
Attributable profit
Ordinary equity
Customer loans
Customer deposits
Total assets
Capital (%)
RWA (TRYm)
Total tier 1
Total capital
Overweight
Year to
Net interest income
Trading profits
Total income
Other income
Operating expense
Bad debt charge
Leverage (x)
12/2012a
12/2013e
12/2014e
12/2015e
4.1
1.6
0.0
6.1
0.4
-2.8
3.3
-0.7
1.8
7.2
12.9
3.6
1.6
-0.1
5.4
0.4
-2.5
2.9
-0.7
1.6
7.4
12.0
3.6
1.6
-0.1
5.4
0.3
-2.4
3.0
-0.7
1.7
7.9
13.2
3.5
1.6
-0.1
5.3
0.3
-2.3
2.9
-0.6
1.7
8.0
13.9
12/2012a
12/2013e
12/2014e
12/2015e
9.1
4.9
1.0
2.4
0.0
8.5
4.7
1.0
3.8
1.7
7.1
4.0
0.9
5.9
1.7
6.0
3.5
0.8
7.3
2.1
Valuation data
Year to
PE
P/NAV
Dividend yield (%)
Issuer information
Share price (TRY)
Reuters (Equity)
Market cap (USDm)
Free float (%)
Country
Analyst
4.07
YKBNK.IS
9,046
18
Turkey
Tamer Sengun
Target price (TRY)
Bloomberg (Equity)
Market cap (TRYm)
Sector
Contact
5.40
3
2
.
4
YKBNK TI
17,692
COMMERCIAL BANKS
+90 212 376 4615
Year to
12/2012a
12/2013e
12/2014e
12/2015e
17.1
11.2
22.5
3.0
13.3
6.5
8.6
4.8
6.3
7.1
27.3
6.0
14.2
10.8
17.1
23.2
20.7
1.7
12.3
12.6
10.2
14.6
18.4
18.4
23.2
12.9
45.4
1.1
111.4
3.3
2.1
1.3
0.5
61.4
12.9
46.3
1.1
113.7
3.3
2.1
1.4
0.4
63.5
12.0
44.9
1.0
115.4
3.3
2.2
1.4
0.3
65.0
13.2
43.9
0.9
117.2
3.3
2.2
1.5
0.3
65.0
13.9
0.44
0.45
0.00
3.88
3.88
0.47
0.48
0.07
4.11
4.11
0.58
0.58
0.07
4.62
4.62
0.68
0.68
0.09
5.22
5.22
Total income
Operating expense
EPS
HSBC EPS
DPS
Ratios (%)
Cost/income ratio
Bad debt charge
NPL/loan
NPL/RWA
Net write-off/RWA
Coverage
DPS
NAV
121
Commercial Banks
MENA and Turkey
17 July 2013
Notes
122
abc
Commercial Banks
MENA and Turkey
17 July 2013
abc
Notes
123
Commercial Banks
MENA and Turkey
17 July 2013
abc
Disclosure appendix
Analyst Certification
The following analyst(s), economist(s), and/or strategist(s) who is(are) primarily responsible for this report, certifies(y) that the
opinion(s) on the subject security(ies) or issuer(s) and/or any other views or forecasts expressed herein accurately reflect their
personal view(s) and that no part of their compensation was, is or will be directly or indirectly related to the specific
recommendation(s) or views contained in this research report: Aybek Islamov, Vikram Viswanathan, Tamer Sengun and
Shirin Panicker
Important disclosures
Equities: Stock ratings and basis for financial analysis
HSBC believes that investors utilise various disciplines and investment horizons when making investment decisions, which
depend largely on individual circumstances such as the investor's existing holdings, risk tolerance and other considerations.
Given these differences, HSBC has two principal aims in its equity research: 1) to identify long-term investment opportunities
based on particular themes or ideas that may affect the future earnings or cash flows of companies on a 12 month time horizon;
and 2) from time to time to identify short-term investment opportunities that are derived from fundamental, quantitative,
technical or event-driven techniques on a 0-3 month time horizon and which may differ from our long-term investment rating.
HSBC has assigned ratings for its long-term investment opportunities as described below.
This report addresses only the long-term investment opportunities of the companies referred to in the report. As and when HSBC
publishes a short-term trading idea the stocks to which these relate are identified on the website at www.hsbcnet.com/research.
Details of these short-term investment opportunities can be found under the Reports section of this website.
HSBC believes an investor's decision to buy or sell a stock should depend on individual circumstances such as the investor's
existing holdings and other considerations. Different securities firms use a variety of ratings terms as well as different rating
systems to describe their recommendations. Investors should carefully read the definitions of the ratings used in each research
report. In addition, because research reports contain more complete information concerning the analysts' views, investors
should carefully read the entire research report and should not infer its contents from the rating. In any case, ratings should not
be used or relied on in isolation as investment advice.
Rating definitions for long-term investment opportunities
Stock ratings
HSBC assigns ratings to its stocks in this sector on the following basis:
For each stock we set a required rate of return calculated from the cost of equity for that stock’s domestic or, as appropriate,
regional market established by our strategy team. The price target for a stock represents the value the analyst expects the stock
to reach over our performance horizon. The performance horizon is 12 months. For a stock to be classified as Overweight, the
potential return, which equals the percentage difference between the current share price and the target price, including the
forecast dividend yield when indicated, must exceed the required return by at least 5 percentage points over the next 12 months
(or 10 percentage points for a stock classified as Volatile*). For a stock to be classified as Underweight, the stock must be
expected to underperform its required return by at least 5 percentage points over the next 12 months (or 10 percentage points
for a stock classified as Volatile*). Stocks between these bands are classified as Neutral.
Our ratings are re-calibrated against these bands at the time of any 'material change' (initiation of coverage, change of volatility
status or change in price target). Notwithstanding this, and although ratings are subject to ongoing management review,
expected returns will be permitted to move outside the bands as a result of normal share price fluctuations without necessarily
triggering a rating change.
124
abc
Commercial Banks
MENA and Turkey
17 July 2013
*A stock will be classified as volatile if its historical volatility has exceeded 40%, if the stock has been listed for less than 12
months (unless it is in an industry or sector where volatility is low) or if the analyst expects significant volatility. However,
stocks which we do not consider volatile may in fact also behave in such a way. Historical volatility is defined as the past
month's average of the daily 365-day moving average volatilities. In order to avoid misleadingly frequent changes in rating,
however, volatility has to move 2.5 percentage points past the 40% benchmark in either direction for a stock's status to change.
Rating distribution for long-term investment opportunities
As of 16 July 2013, the distribution of all ratings published is as follows:
Overweight (Buy)
45%
(34% of these provided with Investment Banking Services)
Neutral (Hold)
38%
Underweight (Sell)
17%
Information regarding company share price performance and history of HSBC ratings and price targets in respect of its longterm investment opportunities for the companies the subject of this report,is available from www.hsbcnet.com/research.
HSBC & Analyst disclosures
Disclosure checklist
Company
ABU DHABI COMM BANK
AKBANK
ALRAJHI BANKING & INVESTM
ARAB NATIONAL BANK
BANK AUDI
BANK MUSCAT
BANQUE SAUDI FRANSI
BLOM BANK
BURGAN BANK
CIB
COMMERCIAL BANK OF QATAR
CREDIT AGRICOLE EGYPT BAN
DOHA BANK LTD
FIRST GULF BANK
GARANTI BANKASI
HALKBANK
IS BANKASI
KUWAIT FINANCE HOUSE
MASRAF AL-RAYAN
NATIONAL BANK OF ABU DHAB
NATIONAL BANK OF KUWAIT
NATIONAL BANK OF OMAN
QATAR ISLAMIC BANK
QATAR NATIONAL BANK
RIYAD BANK
SAMBA FINANCIAL GROUP
UNION NATIONAL BANK
VAKIFBANK
YAPI KREDI BANKASI
Ticker
Recent price
Price Date
Disclosure
ADCB.AD
AKBNK.IS
1120.SE
1080.SE
AUDI.BY
BMAO.OM
1050.SE
BLOM.BY
BURG.KW
COMI.CA
COMB.QA
CIEB.CA
DOBK.QA
FGB.AD
GARAN.IS
HALKB.IS
ISCTR.IS
KFIN.KW
MARK.QA
NBAD.AD
NBKK.KW
NBO.OM
QISB.QA
QNBK.QA
1010.SE
1090.SE
UNB.AD
VAKBN.IS
YKBNK.IS
5.25
7.64
74.00
31.10
6.00
0.60
32.00
8.30
0.60
34.52
71.10
10.04
47.55
16.90
7.78
15.75
5.40
0.70
27.75
12.45
0.93
0.27
68.20
159.90
24.65
51.75
5.05
4.44
4.43
15-Jul-2013
15-Jul-2013
15-Jul-2013
15-Jul-2013
15-Jul-2013
15-Jul-2013
15-Jul-2013
15-Jul-2013
15-Jul-2013
15-Jul-2013
15-Jul-2013
15-Jul-2013
15-Jul-2013
15-Jul-2013
15-Jul-2013
15-Jul-2013
15-Jul-2013
15-Jul-2013
15-Jul-2013
15-Jul-2013
15-Jul-2013
15-Jul-2013
15-Jul-2013
15-Jul-2013
15-Jul-2013
15-Jul-2013
15-Jul-2013
15-Jul-2013
15-Jul-2013
6, 7, 11
1, 2, 5, 6, 7
6, 7
6, 7, 11
6, 7
1, 5, 6, 7, 11
6, 7, 11
6, 7
6, 7, 11
6, 7
5, 6, 7, 11
5, 6, 7, 11
7, 11
1, 4, 5, 6, 7, 11
1, 5, 6, 7
5, 6, 7
1, 2, 5, 6, 7
6, 7
6, 7
1, 2, 5, 6, 7, 11
2, 6, 7
5, 6, 7
1, 5, 6, 7, 11
1, 2, 5, 6, 7, 11
6, 7, 11
2, 4, 6, 7, 11
1, 5, 6, 7, 11
6, 7
2, 6, 7
Source: HSBC
1
2
3
4
5
HSBC* has managed or co-managed a public offering of securities for this company within the past 12 months.
HSBC expects to receive or intends to seek compensation for investment banking services from this company in the next
3 months.
At the time of publication of this report, HSBC Securities (USA) Inc. is a Market Maker in securities issued by this
company.
As of 30 June 2013 HSBC beneficially owned 1% or more of a class of common equity securities of this company.
As of 31 May 2013, this company was a client of HSBC or had during the preceding 12 month period been a client of
and/or paid compensation to HSBC in respect of investment banking services.
125
Commercial Banks
MENA and Turkey
17 July 2013
6
7
8
9
10
11
abc
and/or paid compensation to HSBC in respect of non-investment banking securities-related services.
and/or paid compensation to HSBC in respect of non-securities services.
A covering analyst/s has received compensation from this company in the past 12 months.
A covering analyst/s or a member of his/her household has a financial interest in the securities of this company, as
detailed below.
A covering analyst/s or a member of his/her household is an officer, director or supervisory board member of this
company, as detailed below.
At the time of publication of this report, HSBC is a non-US Market Maker in securities issued by this company and/or in
securities in respect of this company
HSBC and its affiliates will from time to time sell to and buy from customers the securities/instruments (including derivatives)
of companies covered in HSBC Research on a principal or agency basis.
Analysts, economists, and strategists are paid in part by reference to the profitability of HSBC which includes investment
banking revenues.
For disclosures in respect of any company mentioned in this report, please see the most recently published report on that
company available at www.hsbcnet.com/research.
* HSBC Legal Entities are listed in the Disclaimer below.
Additional disclosures
1
2
3
4
126
This report is dated as at 17 July 2013.
All market data included in this report are dated as at close 11 July 2013, unless otherwise indicated in the report.
HSBC has procedures in place to identify and manage any potential conflicts of interest that arise in connection with its
Research business. HSBC's analysts and its other staff who are involved in the preparation and dissemination of Research
operate and have a management reporting line independent of HSBC's Investment Banking business. Information Barrier
procedures are in place between the Investment Banking and Research businesses to ensure that any confidential and/or
price sensitive information is handled in an appropriate manner.
As of 05 July 2013, HSBC owned a significant interest in the debt securities of the following company(ies) :ABU DHABI
COMM BANK,AKBANK,BANK MUSCAT,BANQUE SAUDI FRANSI,COMMERCIAL BANK OF QATAR,DOHA
BANK LTD,HALKBANK,QATAR ISLAMIC BANK,QATAR NATIONAL BANK,YAPI KREDI BANKASI
Commercial Banks
MENA and Turkey
17 July 2013
abc
Disclaimer
* Legal entities as at 8 August 2012
Issuer of report
‘UAE’ HSBC Bank Middle East Limited, Dubai; ‘HK’ The Hongkong and Shanghai Banking Corporation
HSBC Bank Middle East Ltd
Limited, Hong Kong; ‘TW’ HSBC Securities (Taiwan) Corporation Limited; 'CA' HSBC Bank Canada,
PO Box 502601
Toronto; HSBC Bank, Paris Branch; HSBC France; ‘DE’ HSBC Trinkaus & Burkhardt AG, Düsseldorf;
Dubai UAE
000 HSBC Bank (RR), Moscow; ‘IN’ HSBC Securities and Capital Markets (India) Private Limited,
Mumbai; ‘JP’ HSBC Securities (Japan) Limited, Tokyo; ‘EG’ HSBC Securities Egypt SAE, Cairo; ‘CN’
Telephone: +971 4 3904722
HSBC Investment Bank Asia Limited, Beijing Representative Office; The Hongkong and Shanghai Banking
Fax: +971 4 4267397
Corporation Limited, Singapore Branch; The Hongkong and Shanghai Banking Corporation Limited, Seoul
Website: www.research.hsbc.com
Securities Branch; The Hongkong and Shanghai Banking Corporation Limited, Seoul Branch; HSBC
Securities (South Africa) (Pty) Ltd, Johannesburg; HSBC Bank plc, London, Madrid, Milan, Stockholm, Tel
Aviv; ‘US’ HSBC Securities (USA) Inc, New York; HSBC Yatirim Menkul Degerler AS, Istanbul; HSBC
México, SA, Institución de Banca Múltiple, Grupo Financiero HSBC; HSBC Bank Brasil SA – Banco
Múltiplo; HSBC Bank Australia Limited; HSBC Bank Argentina SA; HSBC Saudi Arabia Limited; The
Hongkong and Shanghai Banking Corporation Limited, New Zealand Branch incorporated in Hong Kong
SAR
In the UAE this document has been approved by HSBC Bank Middle East Ltd (“HBME”) for the information of its customers and those of its affiliates only.
HSBC Securities (USA) Inc. accepts responsibility for the content of this research report prepared by its non-US foreign affiliate. All U.S. persons receiving
and/or accessing this report and wishing to effect transactions in any security discussed herein should do so with HSBC Securities (USA) Inc. in the United
States and not with its non-US foreign affiliate, the issuer of this report.
In the UK this report may only be distributed to persons of a kind described in Article 19(5) of the Financial Services and Markets Act 2000 (Financial
Promotion) Order 2005. The protections afforded by the UK regulatory regime are available only to those dealing with a representative of HSBC Bank plc in
the UK. It is not intended for Private Customers in the UK. If this research is received by a customer of an affiliate of HSBC, its provision to the recipient is
subject to the terms of business in place between the recipient and such affiliate.
In Australia, this publication has been distributed by The Hongkong and Shanghai Banking Corporation Limited (ABN 65 117 925 970, AFSL 301737) for the
general information of its “wholesale” customers (as defined in the Corporations Act 2001). Where distributed to retail customers, this research is distributed
by HSBC Bank Australia Limited (AFSL No. 232595). These respective entities make no representations that the products or services mentioned in this
document are available to persons in Australia or are necessarily suitable for any particular person or appropriate in accordance with local law. No
consideration has been given to the particular investment objectives, financial situation or particular needs of any recipient. This publication is distributed in
New Zealand by The Hongkong and Shanghai Banking Corporation Limited, New Zealand Branch incorporated in Hong Kong SAR.
This publication has been distributed in Japan by HSBC Securities (Japan) Limited. It may not be further distributed, in whole or in part, for any purpose. In
Hong Kong, this document has been distributed by The Hongkong and Shanghai Banking Corporation Limited in the conduct of its Hong Kong regulated
business for the information of its institutional and professional customers; it is not intended for and should not be distributed to retail customers in Hong
Kong. The Hongkong and Shanghai Banking Corporation Limited makes no representations that the products or services mentioned in this document are
available to persons in Hong Kong or are necessarily suitable for any particular person or appropriate in accordance with local law. All inquiries by such
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Middle East Ltd. MICA (P) 118/04/2013, MICA (P) 068/04/2013 and MICA (P) 110/01/2013
[378339]
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MENA Research Team
Raj Sinha
Head of MENA Research
+971 4423 6932
[email protected]
Vikram Viswanathan
+971 4 423 6931
[email protected]
Saudi Arabia
Nasser Mou'men
+966 1 299 2103
[email protected]
Sriharsha Pappu
+971 4 423 6924
Sagar Kumar
+966 1 299 2104
[email protected]
Aybek Islamov
+ 971 4 423 6921
[email protected]
[email protected]
Simon Williams
Chief Economist, Middle East and North Africa
+971 4 423 6925
[email protected]
Nicholas Paton, CFA
+ 971 4 423 6923
[email protected]
Egypt
Shirin Panicker
+202 2529 8439
[email protected]
Patrick Gaffney, CFA
Analyst
+966 1 299 2100
[email protected]
United Kingdom
John Lomax
Head of Equity Strategy, GEMs
+44 20 7992 3712
[email protected]
Martin Mabbutt
Analyst
+44 20 7991 6457
[email protected]
Turkish Research Team
Cenk Orcan
Co-Head of Turkey Equity Research
+90 212 376 46 14
[email protected]
Tamer Sengun
Analyst
+90 212 376 46 15
[email protected]
Bulent Yurdagul
Co-Head of Turkey Equity Research
+90 212 376 46 12
[email protected]
Dr. Murat Ulgen
Chief Economist
+44 20 7991 6782
[email protected]
Levent Bayar
Analyst
+90 212 376 46 17
Melis Metiner
Economist
+90 212 376 46 18
[email protected]
[email protected]

MENAT BANKS-Summary of changes to ratings and target

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