Mubasher: Dubai Islamic Bank's (DIB) net loans grew faster than the UAE banking industry loans, logging a 5-year CAGR (2010-2015) of 11% as compared to 6% for the entire industry, according to a recent report issued by MubasherTrade Research.
DIB's lending increased 26% year-on-year as of March 2016 versus 31% YoY as of December 2015.
“DIB recorded an annualized ROAE of 32.8% in March 2016 (28% in 2015). We expect the bank's ROAE to reach 23.1% in 2016 due to the expected lower loan growth over this year which should be reflected on the bank's operations,” MubasherTrade Research said.
The UAE bank's reported CAR is higher than the 12% requirement under Basel II.
Based on the Buy/Moderate Risk recommendation, the research unit has valued DIB based on the average of two models; Excess return model (AED7.04/share) and Warranted Equity Valuation (WEV) model (AED6.04/share).
“This yielded a weighted average PT of AED6.9/share, including a DPS of AED0.36. This implies an expected total return (ETR) of +27%. We used a cost of equity of 12.5% and a terminal growth rate (TGR) of 3.0%. At our PT, DIB would be traded at 2016e PBV and PER of 2.3x and 11.4x, respectively,” the report added.
