Barita Investments Limited Reports Higher Net Profit For Q1

• For the 3 months ending December 31, 2021, BIL reported a net profit of $1.07Bn which is a 4.9% or $49.79Mn increase relative to the prior period. The bottom-line was supported by growth in revenue lines such as net interest income, fees and commission income and foreign exchange trading gains. 
• The company reported a significant fall in gains on investment activities which fell by 55.1% ($368.58Mn) over the period. The company attributed this decline to the impact of higher central bank interest rates which led to increased market volatility. However, despite this decrease, the company’s operating revenue increased by 3.9% due to a 28.7%, 8.6% and 61.5% expansion in net interest income, fees and commission income, and foreign exchange gains, respectively. 
• The overall improvement in operating revenues helped to offset the increase in operating expenses, particularly staff (11.4%) and administrative (11.3%) costs. This increase in costs is in line with the group’s continuous investment into people and processes to ensure greater efficiency and competency. 
• In 2022, we expect macroeconomic variables such as higher inflation and interest rate hikes to have an adverse impact on some business lines and positive impact on others. BIL could realise an increase in net interest income from its credit portfolios. However, the rising interest environment will likely limit gains on fixed income securities, possibly lowering trading gains. However, further economic recovery especially in the local market, is expected to support demand for financial services and products which will help to temper the challenges from the rising interest rate environment. 
• BIL’s stock price has declined by 7.3% since the start of 2022. The stock closed Wednesday’s trading session at $90.98 and currently trades at a P/E of 27.7x earnings which is above the Main Market Financial Sector Average of 15.2x

(Source: Company Financials and NCBCM Research)