Outshining other mid-tier banks, Bank Alfalah (BAFL) entered its sixteenth year of operations with the largest portfolio of earning assets amongst similar sized banks.
Holding the lead position in consumer finance industry, BAFL continued to nurture its advances which grew by over 16 percent in the first quarter of the ongoing year, compared to the same period of the previous year. Resultantly, its advances-to-deposit ratio (ADR) witnessed some improvement.
But, generous lending brings with it inherent risks of higher defaults. In this banks case, toxic assets currently stand at Rs.23.8 billion. However, fresh loans advanced in 1QCY13 helped the bank keep a check on its infection ratio.
What really disappoints is the slide in BAFLs top line despite significant exposure in private sector advances. Needless to say, the low interest rate scenario dampened the top line growth.
Despite an up tick in low cost deposits (see CASA ratio) mark-up expenses climbed; perhaps due to a hike in the floor rate of saving deposits as the same make-up over 30 percent of BAFLs total deposits.
High mark-up expenses pressured BAFLs gross spread ratio, pushing it below the mid-sized banks average of about 40 percent.
An analysis of BAFLs investments reveals that the bank has contained its exposure in Pakistan Investment Bonds in 1QCY13 to cash-in on interest rate risk amid declining interest rates.
Looking forward, having received an overwhelming response on its 5th Term Finance Certificate (TFC) issue, the bank plans to further enhance its asset base by improving its capital adequacy ratio (CAR).
While BAFL plans to continue investing in consumer financing, SME banking and agro-finance with an aim to tap the high-potential rural areas, keeping its NPLs in check would be the real challenge.
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BAFL - Key ratios
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Indicators 1QCY13 1QCY12
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Infection Ratio 10.2% 10.2%
Coverage Ratio 60% 65%
Spread Ratio 36% 42%
Capital Ratio 5% 5%
IDR 45% 42%
ADR 52% 49%
CASA 69% 65%
ROA 0.2% 0.3%
ROE 4% 5%
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Source: Company Accounts
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Bank Alfalah Limited
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Rs (mn) Chg 1QCY13 1QCY12
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Markup Earned -5% 10,572 11,145
Markup Expenses 4% 6,748 6,500
Net Markup Income -18% 3,824 4,645
Provisioning -82% 132 718
Net Markup Income after provision -6% 3,692 3,927
Non Mark-up / Interest Income 27% 1,864 1,463
Operating Revenues 3% 5,556 5,390
Non Mark-up / Interest Expenses 13% 4,028 3,566
Profit Before Taxation -16% 1,527 1,824
Taxation -17% 516 622
Profit After Taxation -16% 1,011 1,202
EPS (Rs.) 0.75 0.89
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Source: Company Accounts
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