KARACHI: Under the challenging operating environment emanating from macroeconomic bottlenecks and digital transformation in sync; Allied Bank diligently worked towards improving all aspects of banking operations, enhancing customer offerings, enriching technological platforms and gearing up towards e-banking transition.
Positive volumetric growth in average earning assets counterbalanced the negative rate variance emanating from lower yield on Investments, Advances and Bank placements. Resultantly, mark-up earned increased by 7% to reach at Rs. 118,649 million during the year ended December 31, 2021. On the contrary favorable rate variance on the Banks’s funding cost has been offset by higher volumes resulting in higher borrowing expense leading to an increase of 18% in interest expense. The Bank posted a net mark-up income of Rs. 45,587 million during the year ended December 31, 2021 as against Rs. 48,421 million during last year.
Improved and upgraded digital banking services amid a highly competitive operating environment along with diversification of revenue streams through persistent enrichment of service suite, and strategic business arrangements enabled the Bank to post a massive growth of 25% in fee-based income during the year ended December 31, 2021, compared to a 7% growth during the year ended December 31, 2020. Allied Bank’s dividend income elevated by 30% to reach at Rs. 2,151 million during year ended December 31, 2021, as compared to a decline of 9% last year.
Imputable to prudent disposal of equity portfolio, The Bank realized a capital gain of Rs. 4,334 million during the year ended December 31, 2021 as against a gain of Rs. 3,420 million during December 31, 2020; registering a healthy growth of 27%.
Comparatively favorable swap curves led to a comparatively healthier increase of 19% on foreign exchange income during the year ended December 31, 2021 as compared to 16% decline during the corresponding year.
Total non-markup income manifested a robust growth of 27% to record at Rs.15,938 million during the year ended December 32, 2021 as against Rs. 12,542 million during the year ended December 31, 2020.
Total non-markup expense increased by 11% to record at Rs. 33,946 million during the year ended December 31, 2021. Increase in imputable to persistently high average inflation during the first half of FY 2022 clocking at 9.8% in December 2021 as against 8.6% during the last year. Moreover, the Bank’s increased spending towards technological transformation and Corporate Social Responsibility (CSR) measures amid Covid-19 successive waves and variants, also contributes towards elevated non-interest expense.
Driven by strong ambition, Allied Bank has strived to be ahead in digital innovation by delivering a seamless banking experience. As the transition is dependent on development digital ecosystem and the brick and mortar-based network expansion is also unavoidable. Therefore, the Bank has adopted a hybrid growth strategy comprising of digital innovation as well as optimized expansion in branch banking operations. Branch network with addition of 27 branches during the year remained at 1,429branches including 1,303 conventional branches, 117 Islamic branches 7 digital branches and 02 overseas branches along with 110 Islamic banking Windows in conventional branches. Automated Teller Machines (ATMs) network augmented to 1,558 with 1,269 on-site ATMs, 284 off-site ATMs and 05 Mobile Banking Units (MBU). Moreover, on account of the Bank’s customer centric product offerings, more than 1 million accounts were opened and 900,000+ debit cards are issued during the year 2021; Augmenting the cards in circulation by 17%.
The SBP’s course towards monetary squeezing by the end of 2021, following an accommodative policy stance maintained for the major part of 2021, led towards immanent asset liability repricing lag. Resultantly, the Bank posted a comparatively higher growth in markup expense and lower growth in markup income from last year. Hence, profit before tax registered a decline of 4% to stand at Rs. 28,391 million during the year ended December 31, 2021.
Likewise, profit after tax stood at Rs. 17,314 million during the year ended December 31, 2021 as against Rs. 18,029 million during the year ended December 31, 2020. EPS of the Bank for the period ended December 31, 2021 was recorded at Rs 15.12.
Driven by economic recovery, improved business confidence and multiple refinancing schemes by SBP, gross advances augmented by 30% to stand at Rs. 665,740 million as on December 31, 2021. Provision against advances decreased by Rs. 891 million during the year ended December 31, 2021. Similarly, net advances increased by 32% to stand at Rs. 652,890 million during the captioned period; distinctly above the industry advances growth of 20%.
Despite the significant shift in the risk landscape amid tough operating environment, the Bank manifested a contraction of 4% in its non-performing loans. Moreover, the Bank’s infection and coverage ratios were registered at 2% and 94.5% respectively. No forced sale value (FSV) benefit was availed while determining the provision against non-performing Advances, allowed under the guidelines of the SBP.
Proactively evaluation the economic scenario led to prudent management of investment portfolio and duration optimization. Net investments bolstered by 28% to reach Rs. 1,064,495 million as on December 31, 2021 as against Rs. 829,621 million as on December 31, 2020.
Amid uncertain interest rate scenario, repricing lag between earning assets and liabilities further emphasized the need to accumulate zero and low-cost deposits. Hence the Bank, maintaining its strategic focus, achieved a striking growth of 24% in current deposits. Total deposits, on the other hand, were recorded at Rs. 1,413,295 million as on December 31, 2021, showing growth of 16% over last year.
Asset base of the Bank manifested a strong growth of 26% as compared to 19% growth in Industry assets footing. Total assets were marked at Rs. 2,010,156 million as on December 31, 2021.
Net assets of the Bank stood at Rs. 127,245 million as on December 31, 2021. Return on Assets and Return on Equity were recorded at 1.0% and 16.5% respectively during year ended December 31, 2021. Capital Adequacy ratio (CAR) registered at 22.33% against a statuary requirement of 11.5%; Indicative of robust Capital positioning of the Bank.
Allied Bank has won the most prestigious award of the Banking Industry “THE BANKER – BANK OF THE YEAR 2021 (PAKISTAN)” The Banker is a world’s renowned monthly international financial affairs publication of financial times group of UK being published since 1926.This award is a testament of the Bank’s strong fundamentals, sound business strategy, service delivery, robust risk management and innovative digital offerings.
Going forward, Allied Bank is well positioned to transcend to its vision of transforming into the Bank for the future together with procreating long-term sustainable value for its stakeholders. The Bank is also determined to provide customer centric innovative digital financial solutions to its diverse customer base together with committing towards agility, resilience, high level of ethics, governance and professionalism.
Copyright Business Recorder, 2022
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