ABL in fine form

The meal was there for the taking and it appears Allied Bank Limited (ABL) made a good feast of it. Its half-yearly profits were driven by the top line, a deviation from the recent trend. Governments never-ending borrowing appetite was fed well by the banks and ABL must not have shied away from it. The 21 percent year-on-year top line growth shows just that.
ABL has long been adjusting its asset-mix towards the favoured investments in government securities. And the ridiculously lucrative returns on PIBs were too delicious to miss. Advances have stayed on the flattish side for quite some time, and little suggests they would have changed this time around either. Gross spreads remained healthy, despite requirement of increased return on deposits--reflecting ABLs effective asset and liability management.
Deposit growth has remained subdued of late, but the mix has improved--further strengthening net interest income, through reduced cost of funds. With an eye on the future, ABL had earlier hinted on diversifying income avenues. Continued improvement in non-operating income through dividend and forex gains is a testament to the strategy well in shape.
Allied Bank also happens to be one of the cleanest amongst peers, with a staggeringly low infection ratio of just seven percent and a very high coverage ratio. No wonder, provisioning charges made no-dent to the profits. What can dent in the future, though, is likely a reversal in interest rate cycles, following which ABL will have to move out of the comfort zone. Whether or not ABL would be lending aggressively is guesswork right now, but a shift in asset-mix will still have to be made--by choice or by design. Till then, all is well with ABL.

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Allied Bank Limited (Consolidated P & L)

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Rs (mn)                           1HCY14    1HCY13    chg

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Markup earned                     31,772    26,153    21%

Markup expenses                   18,905    15,761    20%

Net Markup income                 12,867    10,392    24%

Provisioning/(Reversal)                2        31   -95%

Net Markup Income

after provisions                  12,865    10,360    24%

Non Mark-up / Interest Income      6,380     5,056    26%

Operating revenues                19,245    15,416    25%

Non Mark-up / Interest expenses    8,357     7,467    12%

Profit before taxation            10,888     7,949    37%

Taxation                           3,693     2,361    56%

Profit after taxation              7,195     5,588    29%

EPS (Rs)                            6.28      4.88

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Source: KSE Notice