Allied Bank Limited (ABL) posted its half yearly financial results, registering a strong 37 percent year-on-year growth in pretax earnings, for 1HCY22. A combination of positive variance in volumetric expansion and interest rates led to 64 percent year-on-year increase in markup income. The mark-up expense on the other hand, nearly doubled from last year, mainly on account of increased cost of deposits due to higher interest rate scenario. The gross spreads stayed lower than last year, in line with industrywide trend.

The non-markup income growth continued to support the bottomline, with significant year-on-year improvement in card-related fee, branch banking, dividend income, and gain on exchange rate. Cost to income ratio improved from same period last year, as growth in administrative expenses was confined to general inflation trend.

The asset size increased 6 percent over December 2021, primarily attributed to increased investment pie. ABL’s investment portfolio expanded 8 percent over December 2021 to Rs 1.1 trillion, taking the investment to deposit ratio to 73 percent. The advances, on the other hand, remained stagnant, slightly dropping over December 2022, ending at Rs658 billion. Allied Bank’s ADR continues to hover in 40s – coming down to near 42 percent from 47 percent as at December end 2021.

The deposit base expanded by 11 percent during the period in line with industry growth to Rs1.57 trillion. The current deposits to total deposit ratio stood at a healthy and growing 42 percent, where CASA ratio stood at 82 percent, as current account grew by 8 percent over December 2021. Non-performing loans were down by over Rs560 million. ABL boasts of the lowest infection ratio among peers at just 1.98 percent versus 7.8 percent that for the industry. The coverage ratio at 90 percent is comparable with industrywide coverage ratio of 92.5 percent.

Interests rates may well have peaked, and reprofiling of assets may just be around the corner. All signs point towards an extended period of slow economic growth, and at high interest rates, demand for advances is not expected to pick in the next quarter or two. The government’s borrowing appetite is another story altogether, and ABL would not mind lending more to the sovereign, free of risk.