Despite rising interest rate scenario, outlook for the banking sector in 2019 remains immersed in challenges stemming from a suppressed economic outlook, imposition of stringent regulatory and compliance costs, arbitrary super tax imposition, rising cost of doing business, emerging disruptive challenges and evolving customer dynamics.
In line with the emerging dynamics of the banking sector, ABL prudently managed its earning asset mix in line with rising interest rate scenario, supplemented by a multi-dimensional risk management framework, invested in robust technologies geared towards digital transformation and compliance risk control platforms, further augmented its conventional and Islamic banking product suite, expanded customer outreach while focusing on service quality to further enrich user experience for the valued customers. Despite the aforementioned challenges, this pragmatic strategy enabled the Bank to post a solid performance during the quarter under review.
The positive volumetric growth in average earning assets and improving spreads, enabled the Bank's to increase net interest income by 20%, which aggregated to reach Rs.9,585 million for the quarter ended March 31, 2019 as compared to Rs. 8,012 million in the corresponding period.
The Bank continued to maintain focus on diversifying revenue streams with emphasis on the growth of fee-based income. Accordingly, non-mark-up income reached Rs. 2,537 million for the quarter ended March 31, 2019 with major contribution from fee-based income that registered a strong growth of 20% and stood at Rs.1,386 million for the quarter ended March 2019 as compared to Rs. 1,156 million in the corresponding period.
Capitalizing on the opportunities in the interbank FX market, the Bank posted a significant growth of 132% in income from dealing in foreign currencies, closing the quarter at Rs.630 million as compared to Rs.272 million in the corresponding period last year.
The Bank had already divested and repriced its significant fixed income investment portfolio in 2018, in view of the evolving monetary policy stance of the SBP. While the stock markets remained volatile, the Bank maintained its policy to hold the dividend yielding blue-chip shares portfolio. Accordingly, no capital gains were realized during the quarter under review, against Rs. 1,343 million realized in the corresponding quarter.
The Bank's multi-pronged strategy encompasses focus on enhancement of financial inclusion and customer onboarding. Customer outreach is being pro-actively augmented across the country through conventional and digital channels respectively, to facilitate both the abovementioned objectives.
The overall branch network expanded to 1,345 conventional branches and 117 Islamic banking branches. Similarly, ATM network increased to a total of 1,397 ATMs including 302 off-site ATMs installed at strategic locations across the country.
Despite the aforementioned devaluation led inflationary pressures and the Bank's continued investment in the customer outreach and technology infrastructure, automation led saving initiatives and centralization of operations enabled the Bank to restrict growth in non-markup expenses to 11%. This increase also includes the impact of the new deposit protection insurance cost levied by the State Bank of Pakistan from the third quarter of 2018.
Driven by a robust risk management framework, proactive monitoring and recovery efforts, the net provision reversal against Non-Performing Loans aggregated to Rs. 176 million for the quarter ended March 31, 2019.
Resultantly, the Bank's Profit Before Tax increased to Rs.6,250 million for the quarter ended March 2019, compared to Rs. 6,075 million in corresponding period of last year.
Profit after current year taxation amounted to Rs. 4,084 million as against last year's profit after current year taxation of Rs. 3,771 million, showing an increase of 8%.
However, the finance Supplementary Amendment Act while eliminating the phased reduction of Super tax charge introduced through Finance Act, 2018, has also enacted an incremental Super tax levy, at the rate of 4% for Tax Year 2018, thereby cumulative Super Tax of Rs. 1,098 million was accounted for in the current quarter as against Nil charge in the corresponding period of last year.
In view of above developments, the Bank's Profit After Tax for the quarter closed at Rs. 2,985 million. EPS of the Bank stood at Rs.2.61 per share against an EPS of Rs.3.29 per share last year. Despite a significant additional taxation liability, Return on Equity (ROE) and Return on Assets (ROA) also stood at a robust level of approximately 14% and 1% respectively.
The Bank accomplished a significant milestone during the quarter under review upon crossing the Rs. 1,000 billion mark in the deposit base. Total deposits stood at Rs.1,007,542 million as at end March 2019 compared to Rs.984,475 million at end December 2018; thus, registering a growth of 2.4% for the quarter, well above the industry growth of 1%. Moreover, focus on low/no costs deposit mobilization yielded results as the CASA deposit mix stood at 79% as at March 31, 2019.
In line with the stagnancy in the overall industry advances, gross advances portfolio closed at Rs. 436,658 million. Persistent focus on maintaining industry's leading risk management framework, enabled the Bank to further reduce the 's Non-Performing Loan portfolio to Rs.15,688 million at end March 2019 from Rs.16,065 million as at December 2018.
Infection and coverage ratio as at March 31, 2019 stood at 3.6% and 98% respectively; significantly outperforming the December 2018 industry infection and coverage ratio of 8% and 83.8% respectively. No FSV benefit was availed while determining the provision against Non-Performing advances, allowed under guidelines of the State Bank of Pakistan.
In order to manage the evolving interest rate risk, surplus liquidity was diverted towards Lendings to financial institutions, having the shortest tenors, which closed at Rs. 165,740 million. While the investment portfolio duration was optimized and overall portfolio reduced to close at Rs. 476,874 million; in line with the aforementioned reduction in the industry's total investment portfolio. Accordingly, the totals assets of the Bank closed at Rs. 1,242,221 million
The Bank's equity base closed at a solid level of Rs.107,579 million. Capital Adequacy Ratio of the Bank stood at the robust 22.8% against the statutory requirement of 11.9% indicative of a strong capital positioning of the Bank.-PR
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