It is not easy to make a comeback when you are hit right at the top, but Faysal Bank (FABL) did well enough to report an 11 percent year-on-year increase in after-tax profits, despite a sizeable dip in topline. The bank's topline went down, understandably, as interest rates are at an all-time low, and yields on earning assets have narrowed of late.
FABL, is one of the very few banks with an asset mix tilted towards advances. Advances on its asset books are more than investments, which is somewhat of a rarity these days in the industry. FABL's balance sheet did not grow during the period, it in fact shrunk compared to December 2015. The decline in topline was thus an expected outcome.
The deposits, on the other hand, grew 8 percent over December 2015, and more importantly, in the right direction. Recall that FABL needed some catching up to do in terms of improving its CASA ratio and it now seems to be on the right track. The cost of deposits, is still higher than peers, but is on the mend and the fruits should be seen in the quarters to come.
The real difference t the bottomline was made by a massive decrease in provision charges, which were reduced to a fifth from the comparable period last year. The non-core income also stood the test of times, and ably supported the bottomline. FABL has not been a shy lender as evident from its ADR, but more efforts on improving deposit mix, alongside prudent lending could help FABL overcome unfavourable conditions.
Comments
Comments are closed.