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Banks: Benefits of leaner operations

Event-specific (modalities of CGT imposition) bearish sentiment on the local bourses aside, underlying sector fundamentals are upbeat where we reiterate that the Budget holds positives for banks. While we anticipate lower loan provisions to drive profits over the next few years, competitive edge emanating from operational efficiency may be useful in separating the winners from the also-rans. In this regard, banks have focused on cost control over the last two years, including workforce rightsizing. Other than ABL, we find that the Big-5 banks have considerably trimmed their respective workforces since CY07 and we expect the benefits of leaner operations to manifest over the medium-term. We retain our preference for the Big-5 banks particularly MCB and UBL. In our view, HBL (VSS largely over) and NBP (dividend yield: 9.1%) also merit a closer look post the recent selloff.

AKD Research
15 June 2010



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