Commercial International Bank (CIB) [COMI]: 2021, a Grand Finale
Overweight and 12MPT maintained
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Commercial International Bank (CIB) [COMI]
Egypt / Banks / Q4 2021 Results
12M PT: EGP72.0 (+40%)
set on 30 Jan 2022
Investment Rating: Overweight | Risk Rating: Medium
Remarkable increase in net earnings on lower provisions
Commercial International Bank’s (CIB) [COMI] 2021 separate net profits grew 30% y/y to EGP13.4bn, broadly in line with Prime Research estimates (PRe). Earnings grew in a spectacular manner despite a flat net interest income of EGP24.8bn (-0.8% y/y) due to an increase in interest cost which grew 18% y/y given the huge size of interest-earning assets (IEAs). Strong earnings growth came on the back of: (1) Significantly lower cost of risk (CoR) of 112bps vs. 374bps in 2020; credit provisions were lower 66% y/y, as 2020 was a very strong base year, so this decline brings us back to pre-pandemic levels. (2) Higher non-interest income of EGP3.8bn (+10% y/y). (3) Lower other operating expenses of EGP1.9bn (-28% y/y) due to lower other general provisions. The bank’s strong earnings growth was further complemented by a lower effective tax rate of 30% (-300bps y/y vs. 2020).
ROAE improved on lower CoR
Net interest margin (NIM) retreated 84bps y/y to 5.95% in 2021, in light of weaker yields in 2021 vs. 2020; COMI’s yield slipped to 10.0% vs. 10.8% a year earlier. The reason behind the annual slippage in yields is that rate cuts that took place in 2020 materialized in 2021. Furthermore, ROAE widened to 20.9% in 2021 (+240bps y/y), while ROAA rose to 2.9% (+38bps y/y), with the bank’s equity multiplier stabilizing at 7.2x.
Local-currency lending grew at the highest pace since 2011
Total assets grew 16.5% y/y to EGP497bn in 2021, driven by a 19% y/y growth in total deposits of EGP406bn. On the other hand, gross lending grew to EGP145bn (+22% y/y), driven by robust growth in local-currency loans (+28.5% y/y). We note that Treasury exposure for COMI increased to 43% of total assets. Gross loans-to-deposits ratio (GLDR) remained constant at 40% in 2021. While CoR improved y/y, asset quality weakened on an annual basis, with non-performing loans (NPL) ratio inching higher to 5.14% (+84bps y/y). Hence, NPL coverage ratio declined from 281% to 213%. We note that COMI’s short-term asset repricing gap has turned positive to EGP10bn or 2% of total assets by end of 2021. This could make COMI somewhat beneficiary in the case of any interest rate hike.
Overweight and 12M PT maintained
In view of 2021 results, we maintain our 12MPT at EGP72.0/share (ETR +40%). Hence, we maintain our Overweight rating. COMI is currently traded at 2021 P/E and P/B of 7.5x and 1.5x, respectively. We note that the BoD proposed a DPS of EGP1.36, implying a payout ratio of 20%. Also, the BoD has approved a capital increase of EGP165.4mn (+0.8%) at a par value of EGP10/share for ESOP, pending approval of the Central Bank of Egypt.
Amany Shaaban
Equity Analyst
T +202 3300 5720