On the trailing end of results season at the KSE, Allied Bank Limited (ABL) once again posted a healthy profit last Thursday. There are reasons for all to rejoice, as steady efforts of the banks management has resulted in a cash dividend of 20 percent for the shareholders.
Amid a constrained lending environment, the bank posted after tax profits of Rs5.5 billion in the first half of 2010, up almost 13 percent from the same period last year. Core business posted a gain of around 22 percent, with mark-up income increasing by a modest 9 percent in the six months ending June 30.
The relative improvement rode the wave of volumetric increases in earning assets and a marginal decline in mark-up expense, owing largely to a healthy deposit mix. Still, the banks ADR fell by 8 percent down to 66 percent on June 30.
Investors at the local bourse responded positively to the banks performance as the bank was up marginally - 30 paisas - in the shortened trading hours of Friday.
Since the crisis hit the banking sector in 2008, the favourite metric to track has been provisioning to NPLs. ABL reduced provisioning for toxic assets to Rs329 million, down 13 percent over the same period last year.
Lower returns from the banks investments in equity markets and a decline in foreign exchange trading revenue drove down non-core income, down 28 percent over the previous year.
A slow economy also meant that revenues from investment banking operations - project financing and advisory - also slowed down, hurting the firms bottom line.
Operating expenses for ABL surged well above inflation adjusted targets. Directors notes from the meeting cite a one-off expense in voluntary retirement schemes. Excluding the impact of the one-off expense, operating expenses were more in line with inflation at around 11 percent.
The bank seems to making small steps in the right direction, with its coverage ratio for NPLs improving nearly 7.2 percent to 82.5 percent.
Looking forward, a point of concern for the bank is the increase in ABLs gross-infectious-ratio, up 44 basis points to 6.9 percent in the first six months of the year. Still, ABLs balance sheet looks solid and the infectious ratio is much better than its peers.
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ALLIED BANK LIMITED
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P&L (Rs mn) 1HCY10 1HCY09 % chg 2QCY10 2QCY09 % chg
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Mark-up earned 21,847 20,000 9% 10,913 9,767 12%
Mark-up expensed (11,267) (11,312) 0% (5,701) (5,397) 6%
Net mark-up Income 10,580 8,688 22% 5,211 4,370 19%
Provisioning (2,128) (2,457) -13% (866) (1,516) -43%
Net mark-up income after provisions 8,452 6,231 36% 4,345 2,854 52%
Non-mark-up income 2,621 3,633 -28% 1,049 2,153 -51%
Operating revenues 13,201 12,321 7% 6,261 6,523 -4%
Non-mark-up expenses (5,554) (4,966) 12% 2,559 2,619 -2%
Profit after taxation 3,620 3,061 18% 1,843 1,012 82%
EPS (Rs) 4.63 3.91 2.36 2.06
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Source: Company accounts
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