Commercial International Bank [COMI]: Earnings beat despite higher provisions
Overweight and 12M PT maintained
Commercial International Bank [COMI]
Egypt / Banks / Q3 2020 Results
12M PT: EGP83
(+34%, as of 16 Dec 2020)
Investment Rating: overweight | Risk Rating: medium
Earnings better than expected
Net profit retreated 25% y/y to EGP2.4bn as a result of higher provisions build-up (+3.9 times y/y) of EGP1.6bn (+57% q/q). This was despite higher net interest income (NII) (+17% y/y) of EGP6.3bn (+1.2% q/q). Earnings came in 10% higher than our estimates of EGP2.17bn, thanks to better NII (+5.6%) and despite higher provisions (vs. our estimates of EGP976mn).
Profitability inching higher but ROAE normalizing
Net interest margin (NIM) inched up 0.70% y/y to 7.14% in Q3 2020. This was supported mainly by a 107bps lower cost of funds to 3% as a result of 350bps lower corridor rates during 9M 2020. ROAE declined by 900bps y/y to 19.3% on the back of a 380bps higher cost of risk, along with a higher effective tax rate and a lower financial leverage.
Balance sheet continues to grow with intact asset quality
Total assets grew 6.8% ytd to EGP413bn (+3.3% q/q) in Q3 2020. However, net lending retreated marginally by 0.7% ytd to EGP118.5bn (-1.3% q/q), driven by 16.2% ytd lower foreign-currency loans. Meanwhile, deposits grew 9% ytd to EGP331bn (+3.5% q/q). The asset quality remains intact as justified by a stable non-performing loans (NPL) ratio of 3.97% and leaning on a comfortable higher provision coverage ratio of 289%.
Overweight and 12M PT maintained
COMI is currently traded at a TTM P/E of 8.7x and P/BV of 1.7x. In view of Q3 2020 results which came generally better than our expectations, we are maintaining our 12-month price target (12M PT) at EGP83/share, implying an upside potential of +34%.
Shihab M. Helmy
Equity Analyst
T +202 3300 5723