Commercial Banks: BANK ALFALAH LIMITED - Year Ended December 31, 2005 (Audited)
Bank Alfalah Limited (Bank Alfalah) was incorporated on June 21, 1992 as a public limited company under the Companies Ordinance, 1984. It commenced banking operations from November 1, 1992.
Its shares are listed on Karachi and Lahore stock exchanges. Bank Alfalah has two subsidiaries, namely Alfalah Securities (Private) Limited (76%) and Alfalah GHP Investment Management Limited (56%). Also, the bank has two associated companies, namely Varid Telecom (Private) Limited and Alfalah GHP Value Fund. The Overview hereunder, however, is that of Bank Alfalah alone, without consolidation with its subsidiaries.
The bank now operates with 128 conventional banking (2004: 79) branches, 15 Islamic Banking (2004: 11) branches and four overseas (2004: Nil) branches (three in Bangladesh and one in Afghanistan). During the year, the bank acquired the banking business, undertaking and operations of Shamil Bank of Bahrain B.S.C's Bangladesh operations for US $17.88 million under an agreement dated November 1, 2004. On October 28, 2005, the Board of Directors of the bank approved a plan to segregate its business of Islamic Banking into a separate entity. The Board feels that the Islamic Banking Division should be converted into a wholly owned subsidiary of the bank.
Total employees engaged by Bank Alfalah at end 2005 were 5,218 (2004: 3,352). Pacra has rated Bank Alfalah "AA" (Double A), Entity Rating for long term and "A1+" (A One Plus) for short term. Further, the unsecured subordinated debt (TFCs) of the bank has been awarded a credit rating of "AA-" (Double A Minus).
The authorised capital of Bank Alfalah is Rs 4 billion, comprising 400 million shares of Rs 10 each. In the next AGM, the authorised capital is proposed to be raised to Rs 8 billion. As on December 31, 2005 the paid up capital was Rs 3 billion, which was held by 11,472 shareholders, of which 11,269 individuals hold nearly 12% shares. Forty five foreign shareholders own 75% of the total shares, including holding by H.E. Nahayan Mabarak Al Nahayan and H.E. Sheikh Hamdan Bin Mubarak Al Nahayan at 16.74% and 10% respectively. The rest of the shares are distributed among a number of corporate entities including banks and DFIs. For the year under review, the issuing of bonus shares at 33.33% has been recommended by the Board, for consideration in the next AGM. If approved, the paid up capital will be increased by Rs 1 billion to Rs 4 billion.
Total assets of Bank Alfalah increased by 60% to Rs 248 billion on December 31, 2005 compared to Rs 155 billion on December 31, 2004. Increase in assets has been largely financed through 71% increase in Deposits to Rs 222 billion as on December 31, 2005 (2004: 130 billion). As on December 31, 2005 Investments increased by 62% to Rs 57 billion (23% of Total Assets) compared to Rs 35 billion (23% of TA) as on December 31, 2004. Of the total, Bank Alfalah has rather high investments in Held to Maturity Securities 80% (2004: 80%).
Bank Alfalah's Advances as on December 31, 2005 were Rs 119 billion (48% of Total Assets), registering 34% increase over previous year Advances at Rs 89 billion (57% of TA). On December 31, 2005, of the total Advances 95% (2004: 98%) are in local currency, while 60% (2004: 65%) of the total Advances are for short term. Unlike many banks, Bank Alfalah also has 6% exposure in public/government sector. Lending to financial institutions as on December 31, 2005 was Rs 27 billion, representing 11% of Total Assets (2004: Nil). Major exposure of the bank by way of Advances is in Textiles (20%), Individuals (24%), Agribusiness (3%), Automobile (4%), Food and Allied (3%), Import & Export (3%), Retail/Wholesale Trade (4%), and Others (39%).
Bank Alfalah's equity as on December 31, 2005 stood at Rs 6.738 billion (2.7% of Total Assets) whereas gross NPLs on this date were Rs 1.060 billion (1.3% of Gross Advances). Besides, there is Asset Revaluation Surplus of Rs 0.726 billion and Subordinated Loans of Rs 3.223 billion, thus raising equity stake to Rs 10.687 billion (4.3% of TA). Bank Alfalah has made full provision against Gross NPLs according to the SBP criteria. Very low level of NPLs as shown above could be the result of bank's strategy to lend to the right type of customers. However, as some doubtful loans have the tendency to stay under cover for sometime due to different reasons, a prudent policy for Bank Alfalah would be that the management remains extra vigilant in the appraisal and monitoring of all loans.
The bank achieved phenomenal increases in Deposits (71%) and Total Assets (60%) as on December 31, 2005 compared to the respective balances as on December 31. 2004. However, Shareholders Equity increased by 42% only. Equity stake including the Subordinated Loans on December 31, 2005 amounted to Rs 10 687 billion as against Total Assets of Rs 248.313 billion. In percentage term it works out to 4.3% (2004: 4.8%), which is considered on the lower side. The skewed growth during 2005 has apparently created an exposure situation, for the correction of which the stakeholders might give urgent attention.
Bank Alfalah achieved 56% increase in its profit after tax for the year ended December 31, 2005 to Rs 1.702 billion as compared to Rs 1.092 billion for the last year. ROE at 25.3% for the year is almost at the last year level (2004: 25.0%). Bank Alfalah shares are currently traded at the stock exchanges at prices, more than twice the book value as on December 31, 2005. Performance statistics are given below.
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Performance Statistics
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Balance Sheet (Audited) (Rs million)
As on Dec. 31, 2005 2004
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Total Assets: 248,314 154,834
Cash, balances with banks: 34,502 22,893
Lending to financial institutions: 27,050 0
Investments-Net: 57,426 35,503
Advances-Net: 118,864 88,931
Borrowing from fin. Institutions: 5,845 12,724
Deposits, other accounts: 222,345 129,715
Total Liabilities: 240,850 149,573
Net Assets: 7,464 5,261
Share Capital: 3,000 2,500
Reserves, Un-app. Profit: 3,738 1,869
Total Equity: 6,738 4,369
Surplus on Revalue, Assets: 726 892
Equity incl. Revalue Surplus: 7,464 5,261
Subordinated Loan: 3,223 1,899
Equity and Sub. Loans: 10,687 7,160
Advances-Gross: 120,417 90,291
Gross NPLs: 1,060 2,935
Total Provision: 1,553 1,360
Conting. & Commitments: 79,168 54,515
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Ratios:
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Cash and bank/Total Assets: 14% 15%
Investments/Total Assets: 23% 23%
Advance-Net/Total Assets: 48% 57%
Gross NPLs/Advances-Gross: 0.9% 3.3%
NPLs/Total Equity: 16% 67%
NPLs Prov./Advances-Gross: 1.3% 1.5%
Deposits/Total Assets: 90% 84%
Total Liabilities/Total Assets: 97% 97%
Total Equity/Total Assets: 3.0% 3.4%
Equity & S. Loans/Total Assets: 4.3% 4.6%
Deposits/Equity-Times: 33.0 29.7
Advances/Deposits: 53% 69%
Investments/Deposits: 26% 27%
Contin.& Comm./Equity -Times: 11.75 12.48
Book Value Per Share: 22.46 17.48
Quoted Price (19-04-06) - Rs: 58.70 -
Price/Book Value Ratio: 2.61 -
Income Statement 2005 2004
Markup-interest earned: 12,247 5,620
Markup-interest expensed: 7,205 2,434
Net Markup-interest income: 5,042 3,186
Provisions and write offs: -380 -373
Net mark up after provisions: 4,662 2,813
Total non-markup income: 2,245 1,520
Income before Admn. Exp.: 6,907 4,333
Admin Expenses, etc: 4,344 2,679
Profit before Taxation: 2,563 1,654
Current & deferred tax: 861 562
Profit after taxation: 1,702 1,092
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Ratios: (Annual Basis)
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Markup earned/Total Assets: 4.9% 3.6%
Net Markup Income/T. Assets: 2.0% 2.1%
Net markup (aft. Prov.)/TA: 1.9% 1.8%
Non-Markup Income/TA: 0.9% 1.0%
Income before AE/TA: 2.8% 2.8%
Admin Expenses/TA: 1.7% 1.7%
Profit before Taxation/TA: 1.0% 1.1%
Profit after taxation/TA: 0.7% 0.7%
Profit after tax/Total Equity: 25.3% 25.0%
EPS- (year-end paid up) - Rs: 5.67 4.37
Price/Earnings Ratio: 10.35 -
Cash Dividend: 12% 0%
Bonus Shares: 33% 25%
Cash flow Summary 2005 2004
Net Cash flow, Operations: 34,088 20,639
Net Cash flow, Investing: -24,444 -8,196
Net Cash flow, financing: 1,963 750
Change in Net Liquidity: 11,609 13,193
Net Liquidity at beginning: 22,893 9,700
Net Liquidity at end: 34,502 22,893
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COMPANY INFORMATION: Chairman: H.E. Sheikh Hamdan Bin Mubarak Al Nahayan; Chief Executive Officer: Mohammad Saleem Akhtar; Director: Abdulla Khalil Al MutawaChief Financial Officer: Zahid Ali H. Jamall; Company Secretary: Hamid Ashraf; Registered/Head Office: Bank Alfalah Building, I.I. Chundrigar Road, Karachi; Auditors: KPMG Taseer Hadi & Co, Chartered Accountants; Web Address: www.bankalfalah.com
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