Year ended Dec 31, 2022: Allied Bank posts higher markup income of Rs215.469bn

KARACHI: Banking sector of Pakistan remained resilient and performed exceptionally well in 2022 amid tough operating environment and elevated risks in high interest rate scenario.

Total assets of the industry recorded growth of 20% and reached at Rs. 34,530 billion at the end of the year 2022 as compared to Rs. 28,882 billion last year. Asset growth is achieved mainly on the back of Investments and Advances with an increase of 27% and 18% respectively to reach at Rs. 17,902 billion and Rs. 11,225 billion respectively during the year under review. Industry deposits exhibited a growth of 7% over the last year to reach at Rs.22,467 billion.

Amidst challenging and evolving environment, Allied Bank focused on stable long-term growth and accelerated its efforts for value creation for all the stakeholders.

Positive volumetric growth in average earning assets supported by improving spreads and effective duration management of investments enabled Allied Bank to post higher markup income of Rs. 215,469 million for the year ended December 31, 2022; depicting a strong increase of 82% over the last year.

Unfavorable rate variance on deposits driven by the policy rate increase has resulted in a growth of 104% in mark-up expense to reach at Rs. 148,750 million during the year ended December 31, 2022. Net markup and interest income registered growth of 46% over last year to reach at Rs.66,719 million for the year ended December 31, 2022.

An increase of Rs. 1,336 million or 20% was witnessed in fee-based income reaching at Rs. 8,147 million during the year under review as compared to Rs. 6,811 million during last year. This was achieved through diversified digital revenue streams along with sustained focus on service enhancement and ensuring utmost customer convenience.

Dividend income of the Bank increased by 44% to reach at Rs. 3,088 million during the year ended December 31, 2022 as against Rs. 2,151 million during last year.

Higher trade volumes on the back of significant increase in POL trade volume, volatility in spot and swaps and wider spread manifested a healthy growth in foreign exchange income, which reached at Rs. 7,948 million during the year under review.

Non-markup income increased by Rs. 4,735 million or 30% and amounted to Rs. 20,675 million for the year ended December 31, 2022 as compared to Rs. 15,938 million in corresponding year ended December 31, 2021.

In this volatile revenue environment, the Bank also kept check on the growth in administrative cost. Despite of higher inflation and adverse parity administrative expenses were recorded at Rs. 41,030 million as on December 31, 2022 showing an increase of 21% as compared to last year. Moreover, the Bank’s continued spending towards expanding branch outreach and technological transformation also contributed towards increase in total operating expenses.

During the year, the Bank as a responsible corporate citizen participated in floods relief activities in disaster areas of Baluchistan and Sindh with contribution for provision of food and shelter to the effected people. Employees of the Bank also remained at the forefront and contributed Rs. 15 million for this noble cause.

The Bank’s higher incomes from markup and non-markup streams resulted in elevating Profit Before Tax for the year ended December 2022 to Rs. 46,626 million, a robust 64% growth over last year.

Vide Finance Act 2022, for Banking companies, Corporate Tax rate is enhanced from 35% to 39%, Super Tax on high earning persons is levied for Tax Year 2023 (Income Year 2022) at 10% and subsequently at 4% and tax rate on attributable income from investments in Federal Government Securities is increased (49% for ADR 40% to 50%) retrospectively from Tax Year 2022 (Income Year 2021), which resulted in additional tax charge during the year ended December 31, 2022.Consequently, effective tax rate of the Bank increased to 54.5%, and tax amounting to Rs. 25,432 million as compared to 39.0% and tax amount of Rs. 11,077 million in corresponding year ended December 31, 2021.

The Bank continued to deliver on its commitment to shareholders. Sizable growth in advances portfolio together with effective management of margins and expenses enabled the Bank to achieve 22% growth in Profit after Tax for the year under review, which was recorded at Rs. 21,194 million as compared to Rs. 17,314 million last year. Earnings per Share (EPS) was recorded at Rs. 18.51 as on December 31, 2022 as compared to Rs. 15.12 last year.

Gross advances surpassed Rs. 857 billion Net advances grew by 30% to Rs. 846 billion as on December 31, 2022, as compared to Rs. 653 billion for corresponding year.

Quality of the Bank’s advances’ portfolio is diligently monitored under robust risk management framework and prudent approach. Resultantly, non-performing loans of the Bank decreased during the year by 4% to reach at Rs. 13,104 million as at December 31, 2022 Coverage ratio remained at 90.4% and infection ration dropped to 1.53% which one of the lowest in the industry. The Bank has not availed benefit of Forced Sale Value of collaterals against non-performing loans, allowed under guidelines of the State Bank of Pakistan, while calculating the provision against NPLs.

Investments of the Bank touched Rs. 1,123,117 million as on December 31, 2022 with 6% growth over Rs. 1,064,495 million investments last year.

Total assets of the Bank reached at Rs. 2,250,973 million as on December 31, 2022 as compared to Rs. 2,010,156 million last year showing strong growth of 12%.

Net assets of the Bank stood at Rs. 127,811 million as on December 31, 2022 as compared to Rs. 127,245 million last year. Return on Assets and Return on Equity were recorded at 1.0% and 18.4% respectively for the year ended December 31, 2022. Capital adequacy ratio (CAR) stayed robust at 19.74% considerably above the statutory requirement of 11.5%; depicting strong capital positioning of the Bank.

Allied Bank’s nationwide branch footprint provides a competitive advantage, which has been augmented by opening new format digital and hybrid branches and investing in upgrading existing locations with the objective of enhancing the customer experience. Currently, the Bank serves with 1,453 branches including 1,336 conventional branches and 117 Islamic branches and 18 digital touch points.

The Bank is well equipped to provide banking services 24/7 across the country through numerous physical locations, ATMs, internet & mobile banking and other channels. The Bank’s customer penetration is supplemented by a strong network of 1,572 Automated Teller Machines (ATMs) including 1,296 on-site, 271 off-site and 05 Mobile Banking Units (MBU).

In recognition of Allied Bank’s focus on technological advancement, sustainability, women’s financial inclusion and green practices, the Bank has been awarded “Bank of The Year 2022 – Pakistan” by “The Banker” for second year in a row. The Banker is world renowned financial affairs publication of Financial Times Group U.K, being published since 1926. This award is a testament of long term & well calibrated business strategy, excellent service delivery, quality work and strong technological infrastructure supplemented by robust risk management framework.

Going forward, the Bank is fully geared towards creating long term sustainable value for its stakeholders. The Bank is continuously enhancing its banking service suite by adapting to the ever-evolving customers’ needs. Digital excellence is essential for propelling future growth, augmenting financial inclusion and enhancing market share. Allied Bank will continue to strive towards honoring responsibility towards its employees, customers and stakeholders.

Copyright Business Recorder, 2023