NATIONS TRUST BANK [NTB: LKR57.2]
ANALYST SIGNAL: ‘ACCUMULATE’
Excerpts of the attached:
Earnings Talk :
Nations Trust Bank [NTB : LKR57.2] secured a comfortable 35.3% YoY rise in its net earnings during 2Q2012 to LKR487.5 mn leading the 1H0212 profits to top LKR893.2 mn (up 21.3% YoY) broadly in line with our expectations. The bank’s earnings were assisted by a healthy 12.6% YoY increase in Net Interest Income (NII) following a 12.7% YTD expansion in its loan book, whilst further fueled by a higher 23.4% YoY growth in Non-Interest Income heavily contributed from improved foreign exchange & credit card income. Earning were given an additional boost with the net reversal recorded in its specific provisions (LKR55.2 mn) during 2Q2012 taking the total provisions to end up as a reversal of LKR46.1 mn compared with a reversal of LKR29 mn during 2Q2011.
Analyst Talk :
We forecast NTB to record LKR1.84 bn (up 20.1% YoY) for 2012E, whilst we expect the bank to post earnings of LKR2.32 bn in 2013E (up 26.0% YoY) with an expected net loan growth of c.23% 2013E.
At LKR57.2, NTB trades at attractive valuations of PER 7.2X 2012E net earnings and PER 5.7X 2013E net earnings. The bank currently trades at a PBV of 1.3X 2012E book value. Given the attractive valuations, we expect the counter generate moderate returns over the medium term.