Allied Bank Limited (ABL) remaining fully cognizant of the evolving operating and macroeconomic developments, prudently managed its economic capital during the year ended December 31, 2019. Capitalizing on consistent growth in low and no cost deposits along with superior quality asset base, a multi-faceted long-term strategy governing optimum organizational structure, comprehensive risk management framework, investment towards digital transformation, enhanced customer acquisition and continuous enrichment of its innovative and well-diversified service suite has facilitated ABL in achieving sustainable financial performance.

Positive volumetric growth in average earning assets supported by improving spreads and effective duration management of investments through re-profiling towards flexible, shorter tenor investments in a rising interest rate scenario has enabled ABL to post a higher gross mark-up income by Rs 49,363 million, higher by 67% over the last year.

In-spite of volumetric growth in deposits with immediate re-pricing upon each policy rate change, gross mark-up expense growth curtailed to Rs 39,971 million. As a result, ABL has posted net mark-up income of Rs 41,507 million against Rs 32,115 million in 2018, reflecting a growth of 29%.

Diversification of revenue streams through continuous enrichment of service suite along with concurrent focus on upholding highest service standards has enabled ABL to post a robust growth of 17% in fee income which has reached Rs 5,092 million.

Prudent positioning of ABL's foreign exchange assets and liabilities assisted a notable growth of 32% in income from dealing in foreign currencies to close the year at Rs 1,992 million against Rs 1,504 million recorded in 2018.

Dividend income has decreased, as compared to the corresponding year, as aforementioned economic slowdown weighed in on shareholder returns, thereby impacting dividend payouts. Active participation as a Primary Dealer along-with staggered de-recognition of equity portfolio has resulted in capital gains of Rs 1,579 million realized during the year; lower than Rs 2,382 million recognized in 2018 on the back of prudent disposal of Pakistan Investment Bonds, foreseeing imminent sharp increase in benchmark rates. Correspondingly, non-markup income stood at Rs 10,891 million for the year as against Rs 11,289 million in the corresponding year.

In line with SBP's National Financial Inclusion Strategy for building a dynamic and inclusive financial services sector in the country, branch outreach expanded to 1,395 branches including 1,278 conventional and 117 Islamic banking branches across Pakistan. Islamic network was further augmented with 50 windows added to the network at viable conventional branches while contemporaneous growth in ATM network increased total ATMs to 1,515, inclusive of 1,186 on-site and 329 off-site ATMs.

During the year, Punjab Workers Welfare Fund Act 2019 (PWWF) has introduced provincial levy of WWF in Punjab with effect from December 13, 2019. ABL, based on the legal opinion of the Bank's tax consultant, conservatively reversed the cumulative provision maintained, against WWF from 2014 till the date of PWFF's enactment.

Despite aforementioned outreach expansion coupled with new and ongoing compliance related regulatory changes, sustaining inflationary pressures, ongoing investment in technological infrastructure along-with performance awards and merits adjustments of the human resource; implementation of technology-based solutions has assisted the ABL in optimizing operating costs; thus, operating expenses growth was curtailed to 15%.

Realization of systematic risks posed by the aforementioned economic slowdown has culminated into a lack luster performance by Pakistan Stock Exchange during the year under review. In consideration of downtrend along with translation of other idiosyncratic factors, ABL has recognized a net charge of Rs 979 million for diminution in value of equity securities.

Proactive monitoring and recovery efforts has resulted in a net provision reversal against non-performing loans; aggregating to Rs 394 million for the year under review; thereby infection ratio fell to 3.2% while coverage ratio stood at a strong level of 95.6%, well above the September 2019 industry averages of 8.2% and 84.4% respectively. No FSV benefit has taken while determining the provision against non-performing loans as allowed under the guidelines of the State Bank of Pakistan.

As a result, ABL has earned profit before tax of Rs 24,242 million for the year ended December 31, 2019 as compared to Rs 21,016 million earned in the corresponding year; reflecting a healthy growth of 15%.

Super Tax, which was initially levied vide Finance Act, 2015 has continued and vide Finance Act 2019 was extended with retrospective effect causing an additional charge of Rs 835 million, for the tax year 2018, recognized in first quarter of 2019; effective tax rate thereby rising to 42%.

Profit after tax stood at Rs 14,113 million as against Rs 12,881 million achieved in the corresponding year. Barring impact of aforementioned incremental super tax charge, Profit after tax has posted a notable growth of 16%.

Resultantly Earnings per share of ABL has improved to Rs 12.32 while Return on Equity and Return on Assets stood at a strong level of 16% and 1% respectively.

Loan growth momentum has slowed sharply as a weaker economic scenario and elevated interest rates has dampened credit demand; industry advances growth declined by 83% during the year. Amidst aforementioned industry downtrend, ABL's pragmatic business strategy along with a robust risk management framework facilitated growth of 10% in gross advances, well above the industry growth of 4%; Gross Advances thereby crossed the half a trillion mark and closed the year at Rs 500,168 million compared to Rs 453,867 million posted at end December 2018.

With rising credit risks and a dearth of quality lending avenues, incremental liquidity diversified towards investments; the portfolio was re-profiled, anticipating peaked interest rates, to reach Rs 757,957 million at end December 2019; posting an increase of 13%, synchronized with the industry trend.