A host of banks this season have reported sizeable profit gains - but not many have reported double-digit top line growth. Bank Alfalah (BAFL) has and unlike peers, where the profitability was driven largely from non funded income, the growth stemmed from the top line. Balance sheet numbers are not known yet, but BAFL has not shied away from advances - which is apparently the reason for top line growth.
BAFL's ADR stood at 52 percent as at September end 2015 and high risk high return is seemingly the philosophy at BAFL - in times when most others are satisfied with risk free sovereign government papers. Having developed a broad network of branches in the previous three years, BAFL appears well poised to yield returns.
The deposit growth has been understandably sluggish of late as BAFL also seems to have opted to rather reduce the cost of funds and improve the deposit mix as evident from improving CASA. The non-core income stayed rather flat, despite a surge in gain on sale of securities during the year - but that paled in comparison to the bounties made by other banks under this account.
The strength driven from the balance sheet has enabled BAFL to report decent profits despite a flat non-core income growth. Others have found it tough in times of thin spreads. BAFL did tremendously well to keep the administrative cost in check despite expansion - and the cost to income ratio has continued to improve significantly over the previous year.
BAFL also needs to be cautious on the NPL front, if it is to compete with its bigger counterparts. The cost to income ratio has improved significantly, but it is still some way to catch up with that of the top five banks.
Comments
Comments are closed.