We upgrade our rating for Askari Bank Limited (AKBL) by one notch to ‘Hold’ from ‘Sell’. Our Dec 2015 Target Price of Rs23 offers potential upside of 3% with a justified P/B of 1.08x. The stock currently trades at a 2015E P/B of 1.04x.
We flag the superior DY of 10% AKBL holds, which is one of the highest amongst the JS Universe.
While the bank’s forward 5-year Tier-I ROE (2016F-2020F) is expected to sustain at the levels of 14%, which is higher than the return generation levels of pre-acquisition by the Foundation group (10% during 2007- 2014), we believe the turn-around has been priced in by investors.
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Potential triggers to boost the bank’s ROE may be
(1) increase in consumer products’ market share,
(2) growth in Fee based income and
(3) increase in current account deposits in CASA.