Impressive profits for Askari Bank

Such has been Askari Banks (AKBL) performance turnaround, that losses running in billions seem a thing of distant past. The bank has grown from strength to strength and its 1QCY15 financials are a testament to its ever improving fundamentals. The 1QCY15 profit growth becomes more special, as it is driven primarily from the top line strength.
Much in line with the industry trend, the ADR is in the mid-40s as banks continue investing in government securities. AKBL too, like most its peers, invested heavily in government papers, particularly shifting from treasury bills to PIBs that still offer decent enough rates for banks to ignore. The advances portfolio increased marginally during the period, which is understandable enough.
AKBL has been working harder than anyone else to improve the asset quality and it is reaping fruits. The NPLs continue to slide and the infection ratio by the end of CY14 had slid to 15.8 percent, from as high as 17.2 percent a year ago. And the NPLs are well provided for as well, with the coverage ratio touching 90 by the end of CY14. Deposit growth has been rather muted - a sound strategy, where the need is to improve the deposit mix rather than adding meaningless deposits.
CASA ratio is also on the mend, which reflects in the improved gross spread ratio. The cost to income ratio has also been improving over the years, as more efficiencies are being put in. All in all, things are looking up for AKBL, but CY15 may bring a different set of challenges for the industry, in the form of lower yields on government papers. It would be interesting to see whether the cut in discount rates bring about a change in banks asset mix strategies.

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Askari Bank Limited (Unconsolidated P&L)

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Rs (mn)                              1QCY15    1QCY14      chg

Markup Earned                         9,506     7,555      26%

Markup Expensed                       5,981     5,017      19%

Net Markup Income                     3,525     2,538      39%

Provisioing  / (reversal)               327     (116)        -

Net Markup Income after provisions    3,197     2,654      20%

Non Mark-up / Interest Income         1,588     1,522       4%

Total income                          4,786     4,176      15%

Non Mark-up / Interest Expenses       2,886     2,725       6%

Profit Before Taxation                1,900     1,451      31%

Taxation                                640       431      49%

Profit After Taxation                 1,260     1,021      23%

EPS (Rs)                               1.00      0.81

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Source: KSE notice