FFA foresees profit growth for top lenders

Listed shares are still undervalued

Earnings of the top three local banks can expect higher profit growth in 2013 in light of eased provisioning pressures, according to FFA Private Bank’s Q1 2013 Preview. Net profits are forecast to see a year-on-year growth of nine percent for Bank Audi, eight percent for BLOM Bank, and 14 percent for Byblos Bank. The three banks are expected to sustain a decent balance sheet growth in 2013, with a low single-digit growth in deposits and loans in the first quarter.

In 2012, Bank Audi’s net profits were up by five percent, while those of BLOM Bank inched up by one percent, and those of Byblos Bank fell by six percent. Local lenders have been witnessing pressures on earnings from a low interest rate environment, slower fee income generation, and growing provisioning levels as measures in response to unrest in Syria. The level of provisioning peaked in 2012 as consolidated gross Non-Performing Loans (NPLs) stood at 2.7 percent the total loans portfolio for Bank Audi, 5.4 percent for BLOM Bank, and four percent for Byblos Bank.

FFA confirmed a ‘Marketweight’ rating on Bank Audi shares with a fair value of $7 per share. Bank Audi’s listed share is currently priced at $6.5, as per the last closing (April 12).

FFA reiterated an ‘Overweight’ rating on BLOM Bank shares with a fair value at $10 per share, higher than its current market price of $8.25.

FFA confirmed ‘Marketweight’ rating on Byblos Bank shares with a fair value of $1.6 per share, almost equal to its current market price ($1.68). It said Byblos Bank’s shares could generate more value once the firm gains visibility in its outlook and redeploys capital to create additional shareholder value, by way of expansion, acquisition, or return of capital.