Morning Briefing – Standard Capital Securities

Morning Briefing – Standard Capital Securities

Karachi: Banking Sector dividend play…

Today Standard Capital is going to cover banks which are investors’ favourite on the basis of dividend yield. Amongst all the dividend payers, NBP is at the top on the basis of high dividend yield (being government play). Despite risk of political interference from all levels, NBP would continue to maintain profit streak.

In terms of efficiency, however, MCB has been impressive with its two pronged approach of curtailing cost of deposits plus strenuous risk management. The bank is compared with better regional peers and at present yielding PE of 7x – 8x. MCB is a consistent dividend payer in all four quarters and thus a satiating bet. Standard Capital is expecting cumulative dividend payout of Rs 16 – Rs 18 (dividend yield of 9% ‐ 10%).


Dividend yield% 15% 7%  6.5% 8.4% 6% 7%


MCB reigns supreme on Market capitalization to deposit ratio

Another measure which is rarely covered in the market is market cap to deposit ratio wherein again MCB is glorified with staggering number of 39%. The ratio takes into account the extent of market capitalization vis‐à‐vis deposit penetration.

Apart from MCB, another bank which has significant deposit base in urban and rural centres is HBL. HBL, to us, is also undervalued. Despite hiccups, HBL has yet to see price discovery. However, it is an active player in SME, agriculture loaning, investment banking etc.


Market Capitalization to
Deposits CY10 CY09 CY08
NBP 13% 9% 14%
MCB  39% 31%  46%
ABL 14% 10%  20%
BAHL 12%  11% 12%
UBL 13%  12% 24%
HBL 17% 15% 22%


Standard Capital recommends BUY in MCB (earnings and dividend play) & HBL (better penetration). Among middle tier passive players, Bank Al‐Habib (BAHL), is also maintaining earnings spree and hence in the limelight.

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