Powered by growth in net mark-up income and decline in provisions, Allied Banks first quarter profit rose by 41 percent to Rs2.5 billion from same period a year earlier.
With KIBOR on the higher side, - averaging around 13.78 percent during the first three months of CY11 as against 12.35 percent over the year ago period - growth in the advances and investment portfolio in 2010 compensated the bank with higher mark-up income.
Last year, ABL remained the most generous in lending (among top 5 banks), with an annual 7 percent growth in advances to Rs253 billion at the end of 2010. However, ABLs loan portfolio slightly fell to Rs241 billion as of March 2011, but it is still higher compared to Rs227 billion as of March 2010.
The decline in advances is not a concern for the banking industry these days, as lenders are eyeing the investment in treasury papers. The cumulative net advances for all commercial banks in Pakistan reached around Rs3026 billion as of April 1, 2011, from around Rs3,061 billion at the end of December 2010.
Therefore, in line with the market trend, ABL expanded its investment portfolio by 5 percent to Rs127billion in the past three months. This helped lift the banks investment-to-deposit ratio (IDR) to 34 percent at the end of the first quarter from around 32.5 percent at the end of CY10.
ABL also followed industry trends on the deposit front, by maintaining its deposit base unchanged at Rs372 billion in the past three months. The cumulative deposit for all commercial banks in Pakistan reached around Rs5069 billion as of April 1, 2011, from around Rs5,106 billion at the end of December 2010.
The bank tilted its deposits mix slightly in favour of fixed deposit, with its mix of current and savings account decreasing by 1 percentage point to around 69 percent in the past three months. As the bank tried to limit the rise in its cost of deposits, its net mark-up income increased by 15 percent year-on-year to Rs6.2 billion.
Lower provisioning expenses also contributed to the bottomline growth. Supported by negligible growth in NPLs, which surged from Rs18.6 billion to Rs19 billion in the last three months, and higher coverage ratio, net provisioning against NPLs fell to Rs389.6 million as against Rs783 million during the same quarter a year earlier. This, along with reversal for diminution in the value of investments as against the provision booked same quarter last year helped management to deduct Rs311.6 million in provision in 1QCY11 against Rs 1.26 billion same quarter last year.
Despite the 50 basis points growth in its infection ratio to 7.5 percent, ABL still enjoys a very low infection ratio.
Lower returns from brokerage activities, the banks investments in equity markets and a decline in foreign exchange trading revenue drove down the banks non-markup income, down 8 percent over the previous year. The expansion in branch network, investment in technology and inflation lifted ABLs administrative expenses by around 17 percent year-on-year.
Investors at the local bourse responded positively to the banks performance as the bank was up marginally - 57 paisa - with its share price closing at Rs62.02.
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Allied Bank Limited
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Rs (mn) 1QCY11 1QCY10 Chg
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Mark-up earned 12,298 10,934 12%
Mark-up expensed 6,093 5,566 9%
Net mark-up income 6,205 5,368 16%
Provisioning 312 1,262 -75%
Net mark-up income after provisions 5,893 4,107 44%
Other income 1,447 1,572 -8%
Operating revenues 7,652 6,940 10%
Other expenses 3,489 2,995 16%
Profit before taxation 3,851 2,684 44%
Profit after taxation 2,511 1,777 41%
EPS (Rs) 3.21 2.27
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Source: Company Accounts
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