LAHORE: Banking sector is likely to make an unimpressive growth of 3 percent year on year for the 1H2015 due to imposition of 4 percent super tax, shrinking NIMs and 150% YoY jump in provisioning, a report said.
It was added that the limited rise of 3 percent YoY earnings in 1H2015 is predicted on the back of shrinking NIMs, 150 percent YoY jump in provisioning and imposition of 4 percent super tax.
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The report said that monetary easing of 300bps in the 1H2015 is likely to reduce earnings yields, however, the Target Rate introduction in 2Q2015 will mostly impact banking earnings from 2H2015 onwards. The report further said that one-time 4 percent super tax is likely to take effective tax rate for the sector to 42 percent in 1HF2015 vs. 33 percent in 1H2014.
On capital gains side, the report said that on a sequential basis, earnings of our sample companies is expected to decline by 40 percent QoQ as Net Interest Income (NII) is expected to fall by 7 percent QoQ.
The report highlighted in addition, Non-Interest Income is likely to decline by 22 percent QoQ as we build-in normalized capital gains for the quarter; however, we do not rule out realization of higher capital gains to support declining bottom-line, the report added.
