Assets Statement of Financial Position 2014 2015 2016E ... · PDF fileEarnings UpdateAnalyst:...
Transcript of Assets Statement of Financial Position 2014 2015 2016E ... · PDF fileEarnings UpdateAnalyst:...
Earnings Update
FC Research Analyst: Atchuthan Srirangan Weerasinghe
SRI LANKA
Nations Trust Bank PLC [NTB.N0000] STRONG BUY
P/E 31 Dec 2014 2015 2016E 2017E 2018E
Net Interest Income (LKR mn) 8,940 9,105 10,048 11,286 12,567
Net Profit (LKR mn) 2,536 2,614 2,936 3,402 3,982
EPS (LKR) 11.0 11.3 12.7 14.7 17.1
YoY % Growth 19% 3% 12% 16% 17%
Valuations
PER (x) 6.8x 6.6x 5.9x 5.1x 4.4x
PBV (x) 1.5x 1.2x 1.1x 1.0x 0.9x
Dividend Yield (%) 2.8% 2.8% 3.2% 3.9% 4.8%
NAVPS 60.3 65.8 76.1 87.5 100.7
Adjusted DPS (LKR) 2.1 2.1 2.4 2.9 3.6
Dividend Payout 19% 19% 19% 20% 21%
Mar 2016 Current Price - LKR 73.5 Fair Value – LKR 95.0 4QFY15 Earnings 21% YoY
Source: ft.com
Price-Volume Chart
Disclaimer on Shareholding:
First Capital Limited holds 475,000 shares and affiliated Unit
Trusts hold 40,000 shares in NTB. Neither First Capital
Equities (Pvt) Ltd nor related entities have traded in the
shares in the three trading days prior to this document, and
will not trade in the shares for seven trading days following
the issue of this document.
1-4Q2015 1-4Q2014 YoY
Net Interest Income 9,105 8,940 2%
Total Operating Income 12,519 12,117 3%
Operating profit 4,672 4,571 2%
Profit / (loss) for the year 2,614 2,537 3%
4Q2015 4Q2014 YoY 3Q2015 QoQ
Net Interest Income 2,333 2,362 -1% 2,227 5%
Total Operating Income 3,314 3,101 7% 3,040 9%
Operating profit 1,217 1,025 19% 1,216 0%
Profit / (loss) for the year 675 556 21% 681 -1%
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Net earnings up by 21%YoY to LKR 675mn: NTB reported a net earnings growth of 21%YoY to LKR675mn in 4Q2015 on the back of lower impairment charges. The total impairment charges for the period declined by 51%YoY to LKR 176mn due to 53%YoY reduction in collective impairment. The bank’s continuous focus on quality loan growth and improved collection efforts paid off to report a dip. Meanwhile during 2015 NTB recorded a bottom line growth of 3% to LKR 2.6bn.
NTB’s NII edge down with lower margins: NTB NIMs saw dip to 5.5% in 4Q2015 compared to 5.8% in 4Q2014 and 5.6% in 3Q2015. Lower yields due to competition in the banking industry resulted in Interest income inclining by mere 1%YoY despite loan book increasing by 23% during 2015. However, interest expense increased by 3%YoY in 4Q2015 on the rising cost of funds and intensified competitive pressures though deposits grew at a much slower pace than loans by 16% in 2015.
Stable fee and commission income growth while other operating income jump: Net fees and commission income signified a growth of 11%YoY to LKR 858.9mn in 4Q2015 higher consumer spending via credit cards and increased trading related loans. Trading income in 4Q2015 managed to record a marginal profit of LKR 9mn, but full remained in losses amounting to LKR 94mn resulting from unfavorable movements in the yields of the Government Securities
Operating expenses increased to 12%: 4Q2015 operating expenses jump was primarily driven by the 26%YoY growth in personnel expenses. The increase is due to higher gratuity provisioning and filling of vacancies amounting to 62 employees. However, depreciation of property, plant and equipment declined by 9%YoY to LKR 93.0mn. NTB had no new branch openings during the quarter.
Impairment charges declined 51%: Impairment dipped mainly due to reduction in collective impairment of 53%YoY to LKR 284mn in 4Q2015. This improvement reflects the Bank’s emphasis on quality loan growth and substantial improvements in collection efforts during the quarter. Further, individual impairment also edged down by 33%YoY in 4Q2015. Meanwhile during 2015 the impairment charges
KEY DATA
Share Price (LKR)
Average Daily Volume (Shares) 35,171
Average Daily Turnover (LKR mn) 3.30
230.6
Market Capitalisation (LKR mn) 16,800
Price Performance (%) 1 mth 3 mths 12mths
NTB -5.3% -14.4% -30.1%
ASPI -4.3% -12.1% -14.7%
20.00%
15.00%
9.90%
8.98%
8.06%
Public Holdings 34.85%
Major Shareholders as at 31st Dec 2015
John Keells Holdings PLC
HWIC Asia Fund
Mackinnons Keells Limited
Central Finance Company PLC A/C No 03
Janashakthi General Insurance Limited
73.50
52w High/Low (LKR) 107.9/73.0
Issued Share Capital (Shares mn)
Earnings Update
FC Research Analyst: Atchuthan Srirangan
SRI LANKA
Ratio Analysis 2014 2015 2016E 2017E 2018E
Tier 1 (5%) 14.16% 13.15%
Tier 2 (10%) 18.28% 15.53%
Return on Average Equity 19.79% 17.99% 17.94% 17.99% 18.23%
Return on Average Assets 1.68% 1.56% 1.57% 1.57% 1.57%
Net Interest Spread 6.56% 6.71% 6.70% 6.05% 5.74%
Net Interest Margin 6.67% 6.47% 6.38% 5.99% 5.67%
Cost / Income 53% 55% 53% 53% 54%
Cost / Average Assets 4.2% 4.1% 4.2% 4.2% 4.1%
Asset Growth 12% 10% 13% 18% 16%
Deposit Growth 16% 16% 18% 21% 18%
Borrowings Growth 16% 27% -19% -42% 47%
Loan Growth 19% 23% 18% 18% 19%
Avg. yield on earning assets 13.0% 11.8% 14.0% 12.6% 12.0%
Avg. cost of funds 6.5% 5.1% 7.3% 6.5% 6.2%
Loan / Deposits 89% 94% 94% 92% 93%
Loan / Total Assets 62% 69% 72% 72% 74%
Deposit / Liabilities 76% 80% 84% 86% 87%
Equity / Assets 9% 9% 9% 9% 9%
CASA 33% 32% 31% 32% 32%
Cost / Branch (Rs.'Mn) 71.8 74.6 79.5 83.5 88.1
Rev. / Employee (Rs.'Mn) 4.73 4.65 5.0 5.2 5.4
Employees 2,562 2,695 2940 3240 3540
Branches 89 92 98 108 118
New Branches during the Year 17 3 6 10 10
declined by 17%YoY to LKR 986mn despite a one off individual impairment made in 1Q2015. Future Outlook
Earnings grow by CAGR of 13% despite downgrade: NTB earnings are likely to grow by a CAGR of 13% 2015-18E with 2016E growing by 11% and 2017E growing by 15%. NTB CAGR has been downgraded from our previous forecasts amidst the expected increase in VAT to 15% from 11%. NTB’s loan book is expected to grow by 14% to LKR 207Bn in 2016E while accelerating to 18% in 2017E. Spreads to improve in 2016E: NTB’s market leadership in credit card business has led bank to maintain its NIM at appropriate levels despite its large leasing portfolio. With the rise in interest rates we spreads to increase by at least 40bps with deposits re-pricing faster than its loan book. We expect NTB to continuously work on improving its cost-to- income and while fee based income growth is also expecting remain in line with the Bank’s historic growth rates. SME focus: NTB is planning to further strengthen SME in the coming years with emphasis increasing on process efficiencies and relationship-driven marketing. The strategy to growth in SME s representing all regions and industry sectors. Target price downgraded to LKR 95.0: FC Research downgraded NTB’s target price to LKR 95.0 from LKR 100.0 amidst the bank 4Q2015 performance falling below our expectations. Inline we have downgraded NTB future earnings as well. However, market price has significantly declined resulting in an upgrade in our recommendation.
FCE recommends a STRONG BUY on NTB with a total return of 32% on a 1-year time horizon: At LKR 73.50, NTB trades at a 2016E PER of 6.57x. Our target price of LKR 95.0 (+29% Capital Gain) and dividend yield of 3% will provide a 1-year total return of 32%.
Earnings Update
FC Research Analyst: Atchuthan Srirangan
SRI LANKA
Statement of Financial Position 2014 2015 2016E 2017E 2018E
Assets
Cash and Cash Equivalents 6,900 6,392 7,607 6,763 6,930
Balances with Central Bank of Sri Lanka 3,992 5,284 9,259 11,950 14,101
Reverse Repurchase Agreements 11,014 302 4,572 5,532 6,528
Derivative Financial Instruments 128 554 287 339 403
Financial Assets - Held for Trading 15,700 2,044 3,048 5,532 7,616
Financial Assets -Avalable for Sale 4,329 16,533 - - -
Financial Assets - Held to Maturity 9,653 12,744 15,241 16,597 14,144
Other Financial Assets 3,821 6,511 6,096 7,376 8,704
Loans and Advances to Customers 98,347 121,143 143,360 169,592 201,697
Other Assets 2,506 1,386 5,734 6,784 8,068
Property, Plant and Equipment 2,194 2,144 2,264 2,783 3,317
Intangible Assets 1,284 1,224 1,260 1,267 1,244
Total Assets 159,869 176,261 198,729 234,517 272,753
Liabilities
Due to Banks 2,923 2,276 2,458 2,655 2,867
Repurchase Agreements 15,047 10,406 8,602 13,567 12,102
Derivative Financial Instruments 166 53 61 71 81
Due to Customers 111,010 129,158 152,407 184,412 217,606
Debt Issued and Other Borrowed Funds 10,189 12,974 10,503 6,141 9,020
Current Tax Liabilities 666 426 1,113 1,114 1,114
Other Liabilities 5,559 5,064 5,267 5,477 5,696
Deferred Tax Liabilities 413 733 769 808 848
Total Liabilities 145,973 161,090 181,180 214,244 249,334
Equity Attributable to Equity Holders of the Parent
Stated Capital 5,101 5,101 5,101 5,102 5,103
Statutory Reserve Fund 538 661 863 1,098 1,373
Retained Earnings 8,151 9,336 10,983 12,857 15,012
Other Reserves 105 73 602 1,214 1,931
Total Equities 13,896 15,171 17,549 20,272 23,419
Total Liabilities and Equity 159,869 176,261 198,729 234,517 272,753
NAVPS 60 66 76 88 101
Income Statement 2014 2015 2016E 2017E 2018E
Interest Income 17,452 16,628 22,075 23,691 26,562
Interest Expense (8,513) (7,523) (12,027) (12,405) (13,995)
Net Interest Income 8,940 9,105 10,048 11,286 12,567
Fees and Commission Income 3,008 3,438 4,547 5,375 6,370
Fees and Commission Expense (225) (236) (359) (425) (503)
Net Fees and Commission Income 2,783 3,201 4,188 4,951 5,867
Net Trading Income 111 (94) 188 252 172
Other Operating Income 282 307 352 395 503
Total Operating Income 12,116 12,519 14,775 16,884 19,108
Impairment Charge / (Reversal ) for Loans and
Advances1,157 985 1,165 1,124 823
Net Operating Income 10,959 11,534 13,610 15,760 18,285
Personnel Expenses 2,700 2,883 3,302 3,858 4,468
Depreciation of Property, Plant and Equipment 324 375 383 437 513
Amortization of Intangible Assets 171 242 243 274 305
Other Operating Expenses 3,192 3,362 3,866 4,446 5,113
Total Operating Expenses 6,388 6,862 7,794 9,015 10,399
Operating Profit Before Value Added Tax (VAT) 4,571 4,673 5,816 6,745 7,886
Value Added Tax (VAT) on Financial Services 744 767 1,368 1,590 1,853
Profit Before Income Tax 3,827 3,906 4,448 5,155 6,033
Income Tax Expense 1,290 1,291 1,512 1,753 2,051
Profit for the Year 2,536 2,614 2,936 3,402 3,982
EPS 11.0 11.3 12.7 14.7 17.1
347 1/1, Dr. Colvin R. De Silva Mawatha, Sales Desk: +94 11 2145 000
Colombo 2 Fax: +94 11 2145 050
HEAD OFFICE BRANCHES Disclamer
347 1/1, Dr. Colvin R. De Silva Mawatha, Matara Negombo
Colombo 2 No. 24, 1/3, 2nd Floor, No.72A, 2/1,
Sales Desk: +94 11 2145 000 Lakshman Cooray Building, Old Chilaw Road,
Fax: +94 11 2145 050 Anagarika Dharmapala Mw, Negombo
Matara
Tel: +94 41 2237 636 Tel: +94 31 2233 299
SALES BRANCHES
CEO Jaliya Wijeratne +94 71 5329 602 Negombo
Priyanka Anuruddha +94 76 6910 035
Colombo Priyantha Wijesiri +94 76 6910 036
Damian Le Grand +94 77 7383 237
Nishantha Mudalige +94 76 6910 041
Isuru Jayawardana +94 76 7084 953 Matara
Anushka Buddhika +94 77 9553 613 Sumeda Jayawardana +94 76 6910 038
Kapila Weerasinghe +94 71 5329 615
Gamini Hettiarachchi +94 76 6910 039
Thushara Abeyratne +94 76 6910 037
RESEARCH
Dimantha Mathew +94 11 2145 016 Amanda Lokugamage +94 11 2145 015
Atchuthan Srirangan +94 11 2145 017 Michelle Weerasinghe +94 11 2145 018
FIRST CAPITAL GROUP
HEAD OFFICE BRANCHESKurunegala Kandy
No. 2, Deal Place, No. 6, 1st Floor, No.213-215,
Colombo 3 Union Assurance Building, Peradeniya Road,
Tel: +94 11 2576 878 Rajapihilla Mawatha, Kandy
Kurunegala
Tel: +94 37 2222 930 Tel: +94 81 2236 010
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