KARACHI: Amidst the novel COVID-19 outbreak, the new era of enforcing confinement measures through 'SMART' lockdowns and mandating social distancing practices has accelerated the pace to offer digital banking services to satisfy increasing customers' retail banking needs and at the same time use of information technology to interact with various stakeholders including regulators.
The digital evolution is now also accentuating the importance of assessing and adjusting existing functional structures to instill operational efficiencies for ensuring long-term viability of financial institutions across the globe.
Pakistan's banking sector continued to encounter multifarious challenges emanating from the current economic downturn, disruptive technological advancements, escalating regulatory compliance, emerging cyber security threats, rising risks to asset quality and weakening private sector credit appetite.
Under the challenging and competitive operating environment, Allied Bank Limited sustained focus on its long term multi-pronged strategy driven towards strengthening risk management, optimizing operating efficiencies, continuous augmentation of the innovative technology-based products and service offering to customers through enhancing digital touch points, while rationalizing branch network, resulted in achieving sustainable growth.
ABL undertook various timely measures, by invoking Business Continuity Plan, for the protection of employees and providing un-interrupted financial services to customers to mitigate the risk of spreading COVID-19 pandemic. Emphasis largely remained on offering free of cost seamless e-Banking services through myabl mobile banking and ATMs which indeed helped existing as well as new customers to manage their routine transactions, particularly utility bills payment. The Bank not only opened 91,589 new CASA accounts but also registered 45,391 existing customers on myABL during a very short period of three months. The total no of 677,757 utility bill payments aggregating approximately Rs.940 million routed through e-banking services, with increase in average CASA volume of Rs24,328 million.
Timely diversification and favorable repricing lag, due to proactive duration management of investment portfolio in a declining interest rate movement enabled ABL to register volumetric growth in average earning assets. Which resulted in recording of Net Interest Income (NII) of Rs. 25,007 million during the period under review; representing a healthy growth of 33% from the comparative period.
Amidst the COVID-19 outbreak, ABL continued to focus on upholding high service standards by capitalizing on the emerging digital financial services; which enhanced digital banking transactions mix to 62%, particularly online, compared to the counter transactions and facilitated a growth of 10% in fee income which stood at Rs. 2,773 million compared to Rs. 2,522 million in the corresponding period.
The dividend income witnessed a decline of 21% as weakening shareholder returns in the current economic slowdown and the consequent liquidity constraints hampered companies' dividend distribution capacity. Whereas, ABL recognized capital gain of Rs. 2,426 million. Total non-mark up income stood at Rs. 6,698 million as against Rs. 5,328 million in the corresponding period of 2019; reflecting a growth of 26%.
ABL's broader objective remains to gradually achieve financial inclusion by promoting digital financial services to attract savings of people living in underserved and unserved areas of the Country. As the transition is dependent on developing ecosystem, the brick and mortar-based network expansion could not be avoided. Therefore, the Bank has adopted a hybrid expansion strategy comprising of digital as well as branch banking operations. As a result, branch outreach has undergone the process of optimization and the number closed at 1,387 in June 2020 including 1,263 conventional branches,117 Islamic banking branches and 7 digital branches. ATM network extended to 1,542 ATM's consisting of 1,199 on-site, 340 off-site and 3 Mobile Banking Units (MBU).
Operating cost quarter over quarter remained under check and registered a growth of 5% despite rising regulatory compliance costs, increased CSR, employees and customer health care spending to mitigate socio-economic impacts of novel COVID-19 outbreak, devaluation of rupee and its impact on ongoing investment in technological infrastructure including upgradation of information security measures. Non-markup expense growth for the first half 2020 stood at 12% as compared to 14% over the same period last year.
Timely introduction of various regulatory relief packages to support industry and discourage unemployment have largely helped to manage the liquidity risk, whereas credit risk might emerge going forward leading to increase in non-performing advances.
In consideration of the anticipated downside risks posed by COVID-19 pandemic, a general provision of Rs. 1,311 million has been created. While net charge of Rs.588 million was recognized on account of diminution in the value of equity investment, on a prudent basis, during first quarter, 2020.
As a result, ABL posted profit before tax of Rs. 14,662 million during the half year ended June 30, 2020 as compared to Rs. 11,100 million earned in the corresponding period; showing growth of 32%. Profit after tax recorded a growth of 38% to reach Rs. 8,414 million. Had the Bank not created the general provision, growth in profit before and after tax would have been 44% and 51% respectively. EPS of ABL stood at Rs. 7.35 per share against an EPS of Rs.5.31 per share in the corresponding period, while Equity stood at Rs. 120,328 million compared to Rs. 107,608 million over the corresponding period of last year. Capital Adequacy Ratio of the Bank stood at 25% against the statutory requirement of 11.5% which is indicative of a strong capital positioning of ABL.
Consistent effective monitoring enabled ABL to further reduce gross non-performing advances portfolio to Rs. 15,139 million compared to Rs. 15,854 million in December 31, 2019; while also paving the way for its low infection and strong specific provisioning coverage ratios of 3.4% and 97.9% respectively. The overall coverage ratio after incorporating general provisioning charge stood at 107% whereas the industry Infection and coverage ratios stood at 8.5% and 83.6% respectively as at March 31, 2020.
No FSV benefit was availed while determining the provision against Non-performing advances, allowed under guidelines of State Bank of Pakistan. Growth in zero-cost and low-cost deposits remained a key strategic objective of ABL. Thereby, non-remunerative deposits grew by 6% to close at Rs. 435,839 million; improving their mix in the total deposits to 39.4% as at June 30, 2020.
CASA mix recorded at 86% compared to 81% over the corresponding period last year. Total deposits of the Bank grew by 5.4% to reach Rs. 1,106,140 million compared to December 31, 2019 and 7.5% as compared to June 30, 2019.-PR
Copyright Business Recorder, 2020
Comments
Comments are closed.