Banking

The Company

Banque de l’Habitat (BH) was established in 1989 following the conversion of the National Fund of Housing Savings into a commercial bank. BH has established itself as a pioneer in the mortgage segment in Tunisia, playing a major role in the ownership rate over the past 30 years. After the revolution, the economic consequences that followed highlighted weaknesses of equity ratios, but also strategic and risk exposure, which had a direct impact on the sustainability of the state bank. Following these findings, and like the other two public banks, an audit was launched and lasted two years.

Under the recommendations of international institutions, various aspects have been addressed, such as institutional, financial, performance-based and social, resulting in an overall restructuring plan that revolves around the following pillars: an injection of TD200m (€91.7m) between equity and subordinated bonds; development of a business revival strategy; an assessment of the current balance sheet; improvement of governance; overhaul of the information system; and the establishment of a human resources development plan. The bank has just closed the second and final phase of its restructuring process with a capital increase of TD110m (€50.4m). This was preceded by the issuing of a TD90m (€41.3m) subordinated bond, successfully closed in May 2015.

With an average deposit growth of TD236m (€108.2m) over the last four years, BH ranks in mid-table with a market share of 10% as of June 2015. Because of its status as a real estate bank, the structure of its deposits mainly consists, at 68%, of long-term and expensive resources. In order to overcome the high cost of its resources, BH is seeking to break with this image and diversify maturities in favour of short-term and checking accounts. The bank does not leave much for the real estate sphere, but will be oriented towards shorter maturity products with lower costs. This progress in deposits will be accompanied by a dynamic policy of branch network expansion. The bank expects an increase of 10.4% per annum for its deposits, reaching TD7.6bn (€3.6bn) by 2019.

A pioneer in mortgages, 42% of the bank’s loan book is dedicated to property. In order to diversify its portfolio and reduce its risk, the bank plans to strengthen its position in other sectors and preserve its positioning on specific appropriations. That said, BH will maintain its leadership in mortgage loans, which will continue to occupy a prominent place in the bank’s future strategy. The improvement in profitability over the coming years will see an optimisation of the interest margin, which will continue to weigh substantially on the bank’s NBI. Alongside interest income, the bank also relies on its investment activity and the increase in commissions by promoting new banking services and raising some applied rates.

Outlook

As part of its reorganisation plan, BH started 2015 with a new risk management policy that focuses on three areas: strengthening collection efforts; remediating doubtful portfolios by the partial sale of bad debt to a collection company; and a more focused credit management policy. The impact will be directly visible on regulatory ratios, namely, a non-performing loans ratio of 12.6% and a coverage ratio of 90% by 2019. The injection of equity will allow the bank to comply with the prudential requirements of the central bank, namely, a Cooke ratio above 10% in 2015, versus 4.7% in 2014. New levels of profitability should be achieved with an average earnings growth rate of 24% per year and an average return on equity of 19% over the period. In addition, there should be a dividend yield of 4% from 2016 onwards. Since the start of 2015, BH’s stock has seen a major rise, posting a record performance of 84%, valuing the bank at TD413m (€189.4m). The bank has a very attractive valuation, with a post-increase price-to-earnings ratio of 5.9x and a price-to-book ratio of 0.9x, similar to the cheapest banks in the private sector.