Qatar Islamic Bank (QIBK) Company Report - 2016

Transcription

1. Company Report Sunday , 22 January 2017 Qatar Islamic Bank (QIBK) Recommendation Share Price Implied Upside MARKET PERFORM QR109.60 (5.1%) Risk Rating Current Target Price R-3 QR104.00 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). Highlights   QIBK reports in-line net profit. QIBK generated headline net profit of QR2.16bn (attributable profit: QR1.97bn vs. QR1.86bn in 2015), in-line with our estimate of QR2.16bn. Total revenue and net operating also came in-line at QR3.65bn and QR2.56bn, respectively. QIBK’s YoY increase in profitability was due to strong non-interest income and other non-recurring income. QIBK’s net profit increased by 10.3% YoY. Noninterest income gained by 19.2% driven primarily by FX income (+113.8%) fees (+8.5%) and investment income (+84.6%). Margins remained under pressure on the account of higher cost of funds. Net interest income grew by only 3.9% YoY to QR2.67bn. Hence, NIMs receded to ~2.21% vs. ~2.60% in 2015, dropping by ~39bps. QIBK’s interest spread dropped to 1.9% vs. 2.3% (2015) as cost of funds surged by ~48bps, while asset yield remained flat. We expect further pressure on margins and spreads in 2017 arising from cost of funds. The bank needs to raise expensive deposits in order to lower its LDR in our view.   Current Market Price (QR) 109.60 Dividend Yield (%) In-Line FY2016 Earnings; Tweaking Estimates Slightly  Key Data 4.6 Bloomberg Ticker QIBK QD ADR/GDR Ticker N/A Reuters Ticker ISIN Sector* QISB.QA QA0006929853 Banks & Financial Svcs. 52wk High/52wk Low (QR) 117.00/80.80 3-m Average Volume (‘000) 101.6 Mkt. Cap. ($ bn/QR bn) Shares Outstanding (mn) FO Limit* (%) Current FO* (%) 1-Year Total Return (%) Fiscal Year End 7.1/25.9 236.3 25.0 6.0 +40.1 December 31 Source: Bloomberg (as of Thursday 19, 2017), *Qatar Exchange (as of Thursday 19, 2017); Note: FO is foreign ownership QIBK’s efficiency improved driven by cost containment. Opex grew by 4.3% to QR1.09bn vs. 13.5% in 2015 (+8.5% in 2014). Thus the bank’s C/I ratio dipped to 29.8% vs. 30.8% in 2015. Asset quality worsened but remains acceptable for now. QIBK’s NPLs surged by 74.0% YoY to QR996.0mn. Thus, the NPLs ratio climbed up to 1.0% vs. 0.7% in 2015. Moreover, the coverage ratio dropped to 87% vs. 113% at the end of 2015. Net provisions & impairments jumped by 35.3% to QR447.8mn and CoR moved up to 24bps (14bps in 2015). Although an NPL ratio of 1.0% is good, but the jump from 0.7% to 1.0% indicates pressure on asset quality, in our view.   Net Loans displayed robust performance; in-line with our estimate. QIBK’s loan book expanded by +12.2% YoY to QR98.2bn (in-line with our estimate of QR98.0bn). Moreover, deposits increased by 4.2% YoY to QR95.4bn. Hence, the bank’s LDR was lifted to 103% vs. 96% in 2015. Loan growth was driven by the public sector followed by real estate. 2017 and 2018 estimates remain broadly unchanged at QR2.01bn and QR2.19bn, respectively. The main changes made were to our net interest income estimates. 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 1.7x and 11.4x, respectively. The stock remains expensive based on a PEG of 1.4x.  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 12.0 58.4 1.9 4.75 4.3 FY2017e 8.50 2.2 11.4 63.1 1.7 5.00 4.6 FY2018e 9.29 9.3 10.5 67.5 1.6 5.25 4.8 FY2019e 11.46 23.3 8.7 73.9 1.5 5.50 5.0 Shahan Keushgerian +974 4476 6509 shahan.keushgerian@qnbfs.com.qa Saugata Sarkar +974 4476 6534 saugata.sarkar@qnbfs.com.qa Source: Company data, QNBFS estimates; Note: All data based on current number of shares Sunday, 22 January 2017 1
2. Summary of Changes to Estimates Net Interest Income Non Interest Income Net Operating Income Net Income (Reported/Headline) Net Income (Attributable) 2017 Old 2,946 995 2,748 2,224 1,973 New 2,882 945 2,698 2,265 2,009 Change (%) -2.2 -5.0 -1.8 1.9 1.8 2018 Old 3,280 994 2,977 2,505 2,248 New 3,150 960 2,918 2,456 2,195 Change (%) -4.0 -3.5 -2.0 -1.9 -2.4 Source: Company data, QNBFS Research 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 NPLs to Tier 1 Capital 4.7 6.8 7.3 5.8 Ratios Profitability (%) Efficiency (%) Liquidity (%) LDR IEAs to IBLs Asset Quality (%) Coverage Ratio 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 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 estimates Sunday, 22 January 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 Total Income Operating Expenses 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 Tax Net Profit Before Minority Interest Minority Interest Non-Recurring/Unusual Gains/(Losses) Net Profit (Headline/Reported) 2,155 2,265 2,456 2,981 Interest on Tier 1 Sukuk (135) (205) (205) (205) 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 estimates 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 estimates Sunday, 22 January 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 QNB Financial Services Co. WLL Contact Center: (+974) 4476 6666 PO Box 24025 Doha, Qatar Disclaimer and Copyright Notice: This publication has been prepared by QNB Financial Services Co. WLL (“QNBFS”) a wholly-owned subsidiary of QNB SAQ (“QNB”). QNBFS is regulated by the Qatar Financial Markets Authority and the Qatar Exchange QNB SAQ 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