Allied Bank Limited (ABL) is in very fine shape. The bank posted its 1QCY15 earnings yesterday, accompanied with an interim dividend of Rs1.75/share. The after-tax profits soared by an impressive 14 percent year-on-year, despite negative top line growth. ABL's CASA, cost-to-income, infection and coverage ratios are amongst the very finest in the industry.
The interest rates have been down for quite some time now, and a decline in mark-up income is very much expected. ABL's balance sheet has continued to grow, mainly on the back of increased exposure in government securities. ABL's IDR shot up to 83 percent as at March end 2016, up from 74 percent as a CY15 year end.
Advances, on the other hand, went down in absolute terms, as the bank is still looking for credible borrowers. Slow commodity cycle also meant lower advances during the period. The bank's CASA ratio has continued to improve. Although, the net deposits stayed flattish at Rs734 billion, improvement was seen in current accounts, helping the bank to further reduce its cost of deposits.
The non-interest income continues to provide an able hand to the bottom line growth, mainly on the back of gain on sale of securities. The administrative expenses were kept in check, against industry odds, aiding the cost-to-income ratio.
ABL's infection and coverage ratio are way ahead of the industry curve, which is why ABL managed to post impressive profits in times when most others are struggling to just match last year's profits.
Credit off-take has started to pick up in the industry and the economic indicators are improving (or so we are told). CY16 was tipped a tough year by most bankers, but if ABL's 1QCY16 numbers are anything to go by - things look well under control, strictly in terms of profit making. ABL's prudence surely plays a key role and so does the risk aversion. Time will tell if ABL starts to lend more to the private sector as the year goes by. That said it seems to be doing just fine, even without it.
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