Qatar Islamic Bank (QIBK) Company Report - 17 April

Transcription

1. Company Report Monday , 17 April 2017 Qatar Islamic Bank (QIBK) Recommendation Share Price Implied Upside MARKET PERFORM QR101.50 +2.9% Risk Rating Target Price R-3 QR104.00 Broadly In-Line 1Q2017 Earnings; Provisions Remain Elevated QIBK is the largest Islamic bank with a market share of 11.7% and 11.9% in total loans and deposits, respectively. QIBK spent the past couple of years regaining lost market share. The bank’s loan book grew by a CAGR of 27.1% (2011-16).      Current Market Price (QR) QIBK reports broadly in-line net profit. QIBK generated a net profit of QR555.35mn (+1.0% QoQ and +12.8% YoY), broadly in-line with our estimate of QR522.64mn and BBG consensus (QR524.6mn). QIBK’s bottom-line growth QoQ was muted by a spike in provisions while YoY growth was driven by robust net interest & investment income. Net interest & investment income grew by 17.3% QoQ (16.3% YoY) to QR741.73mn. On the other hand, non-funded income remained weak, dropping by 7.3% QoQ (down 5.1% YoY). Fees remained healthy growing by 8.8% QoQ (flat YoY). On the other hand, net provisions & investment impairments were on the high side, growing by 96.4% QoQ (+56.2% YoY) to QR176.01mn. Pre-provision income jumped by 16.4% QoQ vs. 1.0% for net income. Margins improved despite a 9.0% QoQ expansion in deposits. QIBK’s NIM (based on loans) increased by 47bps and 31bps QoQ and YoY, respectively. Yield on loans increased by 28bps and 55bps QoQ and YoY, respectively. We are of the view that margin expansion was possible because deposits were booked towards the end of 1Q2017. Hence, interest charges are yet to flow through and we expect such interest charges to be booked in the coming quarters. Thus, we expect pressure on margins and spreads in 2017 arising from cost of funds. QIBK’s efficiency improved driven by cost containment and strong revenue growth. Opex grew by 2.0% QoQ (declined by 4.9% YoY) to QR266.52mn, while total revenue grew by 12.3% QoQ (12.0% YoY) to QR1.01bn. As such, QIBK’s C/I ratio improved as well as its JAWs. The bank’s C/I ratio dropped to 26% vs. 29% in 4Q2016 (31% in 1Q2016). QIBK generated JAWs of 10% and 17% QoQ and YoY, respectively. Asset quality remains healthy for now, showing signs of stress. QIBK’s NPLs moved up by 3.9% QoQ to QR1.04bn. Thus, the NPLs ratio remained at 1.0%. Moreover, the coverage ratio improved to 89% vs. 80% at the end of 2016. It should be noted that although an NPL ratio of 1.0% is good, but the jump from 0.7% (at the end of 2015 to 1.0% at the end of 2016 indicates pressure on asset quality, in our view. Growth in deposits outpaced growth in loans by a wide margin. Net loans moved up by 1.4% QoQ to QR99.51bn, while customer deposits expanded by 9.0% QoQ to QR103.94bn. As such, QIBK’s LDR improved by dropping to 96% vs. 103% in 4Q2016. 101.50 Dividend Yield (%) 4.9 Bloomberg Ticker QIBK QD ADR/GDR Ticker N/A Reuters Ticker ISIN Highlights  Key Data Sector* QISB.QA QA0006929853 Banks & Fin. Svcs. 52wk High/52wk Low (QR) 3-m Average Volume (‘000) Mkt. Cap. ($ bn/QR bn) Shares Outstanding (mn) FO Limit* (%) Current FO* (%) 1-Year Total Return (%) Fiscal Year End 117.00/91.00 103.4 6.6/23.9 236.3 25.0 6.4 +5.7 December 31 Source: Bloomberg (as of Monday 17, 2017), *Qatar Exchange (as of Sunday 16, 2017); Note: FO is foreign ownership Catalysts  Beyond a stabilization/recovery in oil prices, the following developments could be perceived positively by the market: 1) Improvement in NIMs and spreads. Recommendation, Valuation and Risks  Recommendation and valuation: We maintain our Price Target of QR104.00. QIBK is trading at a 2017e P/B and P/E of 1.6x and 11.9x, respectively. The stock remains expensive based on a PEG of 1.3x.  Risks: 1) Depressed oil prices remains the biggest risk for QIBK and the banking sector, 2) Increase in credit costs and 3) Exposure to real estate segment. Key Financial Data and Estimates Attributable EPS (QR) EPS Growth (%) P/E (x) Tangible BVPS (QR) P/TB (x) DPS (QR) Dividend Yield (%) FY2016 8.32 6.0 12.1 58.4 1.7 4.75 4.7 FY2017e 8.50 2.2 11.9 63.1 1.6 5.00 4.9 FY2018e 9.29 9.3 10.9 67.5 1.5 5.25 5.2 FY2019e 11.46 23.3 8.8 73.9 1.4 5.50 5.4 Shahan Keushgerian +974 4476 6509 shahan.keushgerian@qnbfs.com.qa Saugata Sarkar +974 4476 6534 saugata.sarkar@qnbfs.com.qa Source: Company data, QNBFS Research; Note: All data based on current number of shares Monday, 17 April 2017 1
2. Detailed Financial Statements FY2016 FY2017e FY2018e FY2019e RoAE (Attributable) 14.2 13.6 13.9 15.9 RoAA (Attributable) 1.5 1.4 1.4 1.6 RoRWA (Attributable) 1.9 1.9 1.9 2.1 NIM (% of IEAs) 2.21 2.19 2.22 2.32 NIM (% of RWAs) 2.54 2.73 2.77 2.74 NIM (% of AAs) 2.00 1.99 2.02 2.12 Spread 1.86 1.81 1.84 1.89 Cost-to-Income (Headline) 29.8 29.5 29.0 27.7 Cost-to-Income (Core) 32.2 31.8 30.8 29.1 102.9 102.0 99.9 100.3 Loans/Assets 70.2 70.3 71.5 74.6 Cash & Interbank Loans-to-Total Assets 11.2 11.1 9.3 8.2 Deposits to Assets 68.2 69.0 71.6 74.3 Wholesale Funding to Loans 20.8 21.3 18.0 13.7 124.6 120.2 119.2 119.6 NPL Ratio 1.0 1.1 1.1 0.9 NPLs to Shareholder's Equity 7.0 7.5 7.9 6.3 Ratios Profitability (%) Efficiency (%) Liquidity (%) LDR IEAs to IBLs Asset Quality (%) NPLs to Tier 1 Capital 4.7 6.8 7.3 5.8 80.2 88.1 95.8 123.1 ALL/Average Loans 0.8 0.9 1.0 1.0 Cost of Risk (bps) 24 24 25 16 Tier 1 Ratio 20.0 15.9 14.6 13.7 CAR 20.5 16.3 15.1 14.2 Tier 1 Capital to Assets 15.1 11.3 11.0 11.0 Tier 1 Capital to Loans 21.5 16.0 15.3 14.7 Tier 1 Capital to Deposits 22.1 16.3 15.3 14.8 9.8 9.8 10.0 9.9 Coverage Ratio Capitalization (%) Leverage (x) Growth (%) Net Interest Income 3.9 8.1 9.3 14.0 Non-Interest Income 19.2 -4.2 1.6 11.7 OPEX 4.3 3.7 5.5 8.4 Net Operating Income 9.1 5.2 8.2 15.5 Net Income (Attributable) 6.0 2.2 9.3 23.3 12.2 7.0 10.7 12.5 Deposits 4.2 8.0 13.0 12.0 Assets 9.8 6.8 8.9 7.9 RWAs 0.2 0.9 14.7 15.6 Loans Source: Company data, QNBFS Research Monday, 17 April 2017 2
3. Income Statement (In QR mn) FY2016 FY2017e FY2018e FY2019e Net Interest Income 2,666 2,882 3,150 3,589 Fees & Commissions 519 545 577 693 FX Income 176 97 110 124 Other Income 291 303 272 255 1,072 Non-Interest Income 986 945 960 3,652 3,827 4,109 4,661 (1,089) (1,129) (1,191) (1,291) Net Operating Income 2,563 2,698 2,918 3,370 Net Provisions (448) (351) (373) (281) Net Profit Before Taxes & Non-Recurring Items 2,116 2,347 2,545 3,089 (10) (12) (13) (15) 2,105 2,336 2,532 3,074 44 (70) (76) (92) 5 0 0 0 Net Profit (Headline/Reported) 2,155 2,265 2,456 2,981 Interest on Tier 1 Sukuk (135) (205) (205) (205) Total Income Operating Expenses Tax Net Profit Before Minority Interest Minority Interest Non-Recurring/Unusual Gains/(Losses) Social & Sports Contribution Fund Net Profit (Attributable) (54) (52) (56) (69) 1,966 2,009 2,195 2,707 FY2016 FY2017e FY2018e FY2019e Source: Company data, QNBFS Research Balance Sheet (In QR mn) Assets Cash & Balances with Central Bank 5,447 5,770 5,821 6,520 Interbank Loans 10,150 10,823 9,304 7,851 Net Investments 19,959 21,510 24,816 23,629 Net Loans 98,171 105,078 116,300 130,845 875 884 900 918 Investment In Associates Other Assets 3,354 3,573 3,838 4,187 Net PP&E 517 516 522 528 Investment in Real Estate 930 848 776 712 Assets of a Subsidiary Held for Sale 0 0 0 0 432 390 348 305 139,834 149,391 162,624 175,494 Interbank Deposits 13,607 15,566 14,173 11,151 Customer Deposits Goodwill & Other Intangibles Total Assets Liabilities 95,397 103,028 116,422 130,393 Sukuk Financing 6,791 6,791 6,791 6,791 Other Liabilities 4,041 2,885 3,027 3,390 Liabilities of a Subsidiary Held for Sale Tier-1 Sukuk Total Liabilities Total Shareholders’ Equity Total Liabilities & Shareholders’ Equity 0 0 0 0 4,000 4,000 4,000 4,000 123,835 132,271 144,414 155,725 14,238 15,290 16,304 17,770 139,834 149,391 162,624 175,494 Source: Company data, QNBFS Research Monday, 17 April 2017 3
4. Recommendations Risk Ratings Based on the range for the upside / downside offered by the 12 month target price of a stock versus the current market price Reflecting historic and expected price volatility versus the local market average and qualitative risk analysis of fundamentals OUTPERFORM Greater than +20% R -1 Significantly lower than average ACCUMULATE Between +10% to +20% R -2 Lower than average MARKET PERFORM Between -10% to +10% R -3 Medium / In-line with the average REDUCE Between -10% to -20% R -4 Above average UNDERPERFORM Lower than -20% R -5 Significantly above average Contacts Saugata Sarkar Shahan Keushgerian Zaid Al Nafoosi, CMT, CFTe Head of Research Senior Research Analyst Senior Research Analyst Tel: (+974) 4476 6534 Tel: (+974) 4476 6509 Tel: (+974) 4476 6535 saugata.sarkar@qnbfs.com.qa shahan.keushgerian@qnbfs.com.qa zaid.alnafoosi@qnbfs.com.qa Mohamed Abo Daff QNB Financial Services Co. WLL Senior Research Analyst Contact Center: (+974) 4476 6666 Tel: (+974) 4476 6589 PO Box 24025 mohamed.abodaff@qnbfs.com.qa Doha, Qatar Disclaimer and Copyright Notice: This publication has been prepared by QNB Financial Services Co. WLL (“QNBFS”) a wholly-owned subsidiary of Qatar National Bank Q.S.P.C. (“QNB”) QNBFS is regulated by the Qatar Financial Markets Authority and the Qatar Exchange QNB is regulated by the Qatar Central Bank. This publication expresses the views and opinions of QNBFS at a given time only. It is not an offer, promotion or recommendation to buy or sell securities or other investments, nor is it intended to constitute legal, tax, accounting, or financial advice. QNBFS accepts no liability whatsoever for any direct or indirect losses arising from use of this report. Any investment decision should depend on the individual circumstances of the investor and be based on specifically engaged investment advice. We therefore strongly advise potential investors to seek independent professional advice before making any investment decision. Although the information in this report has been obtained from sources that QNBFS believes to be reliable, we have not independently verified such information and it may not be accurate or complete. QNBFS does not make any representations or warranties as to the accuracy and completeness of the information it may contain, and declines any liability in that respect. For reports dealing with Technical Analysis, expressed opinions and/or recommendations may be different or contrary to the opinions/recommendations of QNBFS Fundamental Research as a result of depending solely on the historical technical data (price and volume). QNBFS reserves the right to amend the views and opinions expressed in this publication at any time. It may also express viewpoints or make investment decisions that differ significantly from, or even contradict, the views and opinions included in this report. This report may not be reproduced in whole or in part without permission from QNBFS COPYRIGHT: No part of this document may be reproduced without the explicit written permission of QNBFS. 4