Profit after tax for the fourth quarter grew 32% y-o-y, but was below our est. due to higher provision w.r.t a stressed, but standard infra account. We lift our FY17-18E EPS by 10-19% and PT to R8,800. We believe strong loan growth outlook, better cost efficiency and lower credit costs should drive 34% EPS CAGR over FY16-18E.
Valuations at 4.5x BV, 24x FY17E EPS appear to be at a premium, but valuation multiples may sustain given strong growth and returns outlook.
Consumer AUM grew 44% y-o-y in Q4. Consumer durables AUM growth moderated to 33% (42% y-o-y in Q3), but growth in other categories (lifestyle, digital products, personal loans) remained strong. BAF also entered into lifecare finance segment in Q4. SME loan moderated (20% y-o-y) in Q4 as mortgage loan growth was muted (1% y-o-y) due to BAF’s decision to limit exposure to intermediaries. New segments like rural & commercial continue to report strong growth, from a low base. We forecast AUM to grow at 31% CAGR over FY16-18E.
Q4 NIM was 9.61% (-288bps q-o-q, +5 bps y-o-y) vs. our 9.9% est. This was partly due to income reversal related to provision.
Also, subvention income pertaining to strong consumer loan growth in Q3 was reflected in Q3, but corresponding funding cost continues to be reflected in Q4, resulting in lower NIM on a q-o-q basis.
We forecast NIMs to moderate 18bps y-o-y in FY17 as we factor in NIM pressure in mortgage loans and loan mix changes, but this should be offset by better cost efficiency.
