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Commercial Bnk.[COMB]:HOLD

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  • Commercial Bnk.[COMB]:HOLD

    COMB’s soft 4Q CY18 earnings (EPS of LKR 4.01; -17.4% YoY), was largely due to a weak top line (SLFRS 9 impact), that saw a 33bps drop in NIM at the bank level. Credit costs of 93bps was better than our estimate and we expect a further improvement in CY19E, helping profitability. Loan growth was robust at 18.1% YoY, and we expect 16.5% for CY19E. With the current capital buffers and the growth expectations, we believe that the bank would need to raise tier 1 capital in CY19E, which would be an overhang on valuations. Accordingly, our TP for COMB moves to LKR 101.30/share (+11.6% TSR) and COMBX to LKR 91.60/share (+12.4% TSR)
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