Askari Commercial Bank''s profit is likely to double for the six-month period ended on June 30, on account of capital gains made from stocks investments, growth in credit to private sector and branch expansion. The board meeting of Askari Commercial Bank (ACB) is scheduled to be held on August 11-12, 2004.
The board, among other items on the agenda, is expected to approve the accounts for the half year of 2004.
The half-year results may come as a positive surprise on account of bank''s focus on branch expansion and credit expansion in SMEs and consumer segment has resulted in strong growth in advances and improvement in Net Interest Margin (NIM), said a report of Alfalah Securities prepared by Mohammad Jawaad Khan.
The bank is sitting on possible capital gains on securities of more than Rs 550 million to Rs 650 million. "We expect the bank to earn a net profit after tax of Rs 1,050 million or EPS - Rs 8.36, a 100 percent improvement from last corresponding period. However, we expect ACB to continue its conservative pay-out policy and pay cash dividend of 20 percent and stock dividend of 10 percent."
Askari Bank''s recurring earnings are healthy, given the fact that the management''s focus on growing core business has resulted in advances growth, expansion in branch network and improvement in NIM. ACB''s advance-to-deposit ratio has improved to current 75 percent from 52 percent in CY2002. The bank has defined a clear SME and consumer lending focus contributing to stronger growth in 0advances as these segment are relatively under banked and availability of a higher net interest margin (NIM).
The focus on these sectors could potentially increase the need for provisioning. However, the brokerage house feels that the bank already had good provision for NPL, reducing the likelihood of exceptionally high provisions or write-offs in the future.
The improvement in the NIM has been equally supported by increase in the branch network and low cost deposits.
The dual phenomenon of reduction in cost of funds and jump in advances at a time when yield curve is shifting upwards is expected to lead to improvement of NIM to 78 percent from 59 percent in CY02 while in absolute terms the core earnings is expected to increase to Rs 1,508 million in first half of 2004 from Rs 1,278 million of the corresponding period a year earlier.
The non-core earnings of Askari Bank are expected to grow by a whopping 110 percent as a result of (1) increase in trade finance business, and (2) capital gains to be realised through the P&L in order to improve the financial outlook of the bank prior to efforts for acquisition of Allied Bank.
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