BAFL, the sixth largest commercial bank of the country, boasted a healthy performance in the quarter ending September 2013. Given its heavy concentration on consumer banking and SME banking, the bank is able to perform well, despite a top line that is just about static compared to the previous quarter.
A staggering jump of 15\ percent, quarter on quarter, in the Net Interest Margin (NIM) provided its bottom line reasons to rejoice. BAFL’s spread ratio boosted from 37 percent in 2Q CY13 to 43 percent in 3Q CY13. This came on the heels of the bank’s enhanced focus on low-cost deposits.
During 2Q CY13, BAFL’s CASA (proportion of low-cost deposits to total deposits) magnified to 70 percent from 65 percent, a year ago. Even more mention worthy is the fact that the fraction of current deposits as a percentage of total deposits also perked up during last quarter which significantly helped in containing mark-up expense and buttress the NIM.
BAFL’s asset quality improved during 2Q CY13 as Non-Performing Loans (NPLs) took the edge off. Despite the decline in NPLs, the bank continued to book provisions on NPLs to shore up its coverage ratio which improved from 60 percent in 1Q CY13 to 69 percent in 2Q CY13. However, the drop witnessed in the provisioning expense came on the heels of decline in provision from investments as the bank had done complete provisioning on its 8.24 percent stake in Warid Telecom.
The quarter-on-quarter non-mark-up gains also added value to the bottom line which ended up improving by 47 percent quarter on quarter. A year-on-year comparison shows a different picture for the bottom line which dropped by two percent in 9M CY13 on the back of NIM shrinkage.
The top line slid by seven percent, in the same period, due to downward interest rate cycle. The top line slide produced a spill-over effect on the bottom line despite a significant drop in provisioning expense and healthy growth in non-mark-up income.
Going forward, with its focus of private sector lending, BAFL is expected to be one of the major beneficiaries of reversal in the interest rate cycle. Besides, focus on current deposits is also likely to produce positive impact on the NIM. The sale of Warid would add capital gains buttressing the non-mark-up income and produce one-off gains in its EPS.
According to sources, provisioning expense on NPLs is also projected to subside from CY14 onwards as improvements in asset quality and increase in provisioning expense on bad debts off late would push up BAFL’s coverage ratio to its desired level by CY14.
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Bank Alfalah Limited (Unconsolidated P&L)
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Rs (mn) 3QCY13 QoQ chg 9MCY13 YoY chg
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arkup Earned 10,851 0% 32,291 -7%
Markup Expenses 6,195 -9% 19,772 -5%
Net Markup Income 4,656 15% 12,519 -10%
Provisioning/(Reveral) 204 -72% 1,077 -44%
Net Markup Income
after provisions 4,452 35% 11,441 -4%
Non Mark-up/Interest Income 2,066 2% 5,958 18%
Operating Revenues 6,518 22% 17,399 2%
Non Mark-up/Interest Expenses 4,479 9% 12,614 7%
Profit Before Taxation 2,039 67% 4,785 -8%
Taxation 665 132% 1,467 -19%
Profit After Taxation 1,374 47% 3,318 -2%
EPS (Rs.) 1.02 48% 2.46 -2%
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Source: KSE Notice
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