KARACHI: While remaining cognizant of the emerging challenges, Allied Bank Limited (ABL) continued to achieve notable momentum by pursuing its strategy of consistent growth by focusing on technology driven automation, risk management framework, introduction of e-banking services to augment digital financial inclusion along with optimization of conventional branch network to further enhance customers’ experience.
Sharp decline in interest rates led the average policy rate to contract to 9.6% as against 11.6% in the corresponding period. Effective duration management, favorable repricing lag, volumetric growth along with change in mix has enabled ABL to earn Net Interest Income of Rs. 37,185 million during the nine months period ended September 30, 2020; reflecting a growth of 29%.
COVID-19 pandemic envisaged technology breakthrough by accelerating digital transformation of organizations to ensure uninterrupted business activity while addressing social distancing and adaption to the new normal. ABL’s constant emphasis of capitalizing on the emerging digital financial avenues along with maintaining diversification of revenue streams through sustained enrichment of services suite has facilitated a growth of 10% in Fee income which stood at Rs. 4,029 million during the nine months period ended September 2020 compared to Rs. 3,668 million in the corresponding period.
Dividend income observed a downturn of 36% on the back of prevailing economic slowdown which has obstructed investee companies’ dividend distribution capacity due to liquidity constraints. ABL recognized a capital gain of Rs. 2,838 million in the period under review as against Rs. 853 million in the corresponding period, reflecting a growth of 233%. Adverse movement of swap points was observed on account of decline in foreign investment portfolio and adverse impact on Special Convertible Rupee Accounts. However, Foreign exchange (FX) income which registered a loss of Rs. 188 million in the first quarter of 2020; has reached Rs.1,295 million during the nine months period ended September 30, 2020. Resultantly, total non-markup income augmented by 17% to stand at Rs. 9,146 million during the period ended September 30, 2020 as compared to Rs. 7,820 million in the corresponding period.
ABL’s operating expenses growth curtailed to 9% during the nine months period ended September, 2020 much lower than 18% growth over the same period last year, despite continuous investment towards technological upgradation to enable digital migration, increased spending to address socio-economic influence of COVID-19, currency devaluation and hiked inflationary pressures.
In line with rapidly transforming digital space in Pakistan towards more convenient and flexible ways of banking, ABL thrives towards a hybrid expansion strategy involving digital and Brick and mortar banking operations, together with resorting more focus towards e-banking. Consequently, transaction mix of digital and counter based services improved from 46:54 as at December 31, 2019 to 57:43 as at September 30, 2020. ATM network augmented to 1,552 comprising of 1,210 on-site, 339 off-site and 3 Mobile Banking Units (MBU). Branch outreach closed at 1,385 including 1,262 conventional branches, 117 Islamic banking branches and 6 digital branches.
Despite the challenging economic and banking dynamics ABL posted a 30% increase in profit before tax to stand at Rs. 21,443 million. Profit after tax increased to Rs. 12,410 million for the nine months ended September 2020 as compared to Rs. 9,405 million in the corresponding period of 2019; registering a growth of 32%. Consequently, earning per Share (EPS) of ABL stood at Rs. 10.84 per share as against an EPS of 8.21 per share in the corresponding period.
In line with contraction witnessed in overall industry advances as a consequence of economic slowdown; ABL’s gross advances portfolio closed at Rs. 455,596 million. Persistent focus on maintaining a robust risk management framework coupled with prompt introduction of regulatory relief packages to assist industry growth and mitigate liquidity risk has led to a decline of Rs. 1,337 million in Non-Performing advances which closed at Rs. 14,517 million as on September 30, 2020 as compared to Rs. 15,854 million in December 2019.
ABL’s infection and coverage ratio stood at 3.2% and 95.7% respectively. Meanwhile loan loss coverage ratio including general provision made in respect of financing against potential losses due to COVID-19 amounting to Rs.1,311 million stood at 104.8% significantly outperforming the June 30, 2020 industry infection and coverage ratio of 8.9% and 85.0% respectively. No forced sale value (FSV) benefit was availed while determining the provision against Non-Performing advances, allowed under guidelines of the State Bank of Pakistan.
Proactive review of economic scenario led to prudent management of investment portfolio which has resulted in change of mix coupled with duration optimization. Net Investments increased by 4% to close at Rs. 788,219 million as at end September 30, 2020. The liquidity is placed primarily in Government securities with Rs. 381,361 million deployed in Pakistan investment Bonds (PIB) as at September 30, 2020 as against Rs. 154,349 million as at December 31, 2019; improving PIB contribution to the total investment mix to 49% as on September 30, 2020 compared to 21% as at December 31, 2019.
Overall deposits have increased by 7% to stand at Rs. 1,122,372 million as at September 30, 2020. ABL pivoted its concentration towards low cost deposits which is evident from a growth of 11% in non-remunerative current deposits. Resultantly, Current Account and Saving Account (CASA) deposit mix has improved to 86% as at September 30. 2020 from 83% as at December 31, 2019.
Funding mix was optimized during the period, which has resulted in decline of Borrowings from Rs. 266,448 million as at December 31, 2019 to Rs. 145,896 million as at September 30, 2020 i.e. 45%. Resultantly Total Assets of the Bank stood at Rs. 1,441,688 million as at September 30, 2020 as against Rs. 1,481,121 million as at December 31, 2019 i.e. 3%.
ABL’s Equity base stood at a robust level of Rs. 122,048 million as at September 30, 2020; reflecting a growth of 6%. While Return on Equity and Return on Assets manifested a strong level of 17.7% and 1.1% respectively. Capital Adequacy Ratio of the Bank stood at 27% against statutory requirement of 11.5% which is indicative of a strong Capital positioning of Allied Bank.—PR
Copyright Business Recorder, 2020
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