The asset base of Allied Bank Ltd (ABL), the country's fifth largest bank, reached Rs 516 billion as on 31st December 2011. The Bank's asset base has marked a CAGR of 15.40 percent during the past five years (2006-11), when the industry asset base grew by 13.90 percent.
ABL's activities include commercial banking, corporate finance, trading and sales and retail banking with income from commercial banking accounting for around 84 percent of the total income in CY11. The Bank added 31 new branches to its existing infrastructure in CY11, bringing the total network to 837 branches at the end of CY11.
Net profit Marking an annual growth of 23 percent in its bottom line, ABL, clocked in a net profit of Rs 10 billion during CY11. This is largely due to expansion in operating revenues, coupled with lower provisioning expenses. ABL posted impressive growth in profitability during CY11, given that the Bank's bottom line had increased by 15 percent in CY10.
Mark-up revenues With mark-up revenues up by 15 percent in CY11 compared to the previous year, the Bank benefited from expansion in its asset base. The Bank has massively tilted its asset portfolio towards investments, lifting investment by a massive 61 percent during CY11 to Rs 196 billion at the end of CY11. At the same time, the industry's investment base expanded by 41 percent.
This lifted the Bank's Investment to Deposit Ratio (IDR) by 16 percentage points to 49 percent at the end of December 2011, when the industry's ratio increased by around 10 percentage points to 51 percent. On the other hand, the Bank's advance portfolio suffered and fell by 3 percent during the year to Rs 244 billion at the end of December 2011. Although, this hauled down Advance to deposit ratio (ADR) by 7 percentage points to 61 percent as of 31st December 2011, the Bank's ADR is still a notch above the industry's ADR of 53 percent. Hence, revenues from investments accounted for 33 percent of the total mark-up revenues in CY11, as opposed to its share of 26 percent in CY10.
Mark-up expenses Expansion in the deposit base lifted the Bank's mark-up expenses. Its deposit base grew at a slower pace compared to the industry. ABL's deposit base increased by 8 percent in CY11 to Rs 400 billion as on December 31, 2011, when the combined deposit base of all scheduled banks increased by 15 percent. However, the best part is that the Bank managed to improve its CASA ratio by around 180bps point to 72 percent at the end of CY11.
Net interest income Although net interest income accrued a gain of 12 percent; the Bank gross spread ratio eased down by around 160bps to 48.6 percent in CY11 compared to the previous year. The peer banks have not announced their results (annual) yet, but the top five banks average gross spread ratio stood at 55 percent during 9MCY11, when ABL's gross spread was 50 percent. The banking industry's average spread stood at 7.63 percent in CY11, nearly 18bps higher than CY10.
Non mark-up income and expenses Thanks to higher income from investment banking activities, dividends and dealing in foreign currencies, the Bank's non-mark-up income improved by 23 percent in CY11. The Bank's other income accounted for around 22 percent of the total operating revenues in CY11, as opposed to 20 percent in CY10.
In keeping with high inflationary pressures, increasing expenditure on infrastructure strengthening and technological upgradation, administrative expenses grew by 17 percent to around Rs 13 billion in CY11. However, the Bank's income to expense ratio inched down to 2.3 in CY11, from 2.4 in CY10.
Non-performing loans The bank witnessed a 9 percent jump in NPLs during CY11 to Rs 20 billion at the end of December 2011. This coupled with decline in gross advances lifted the Bank's infection ratio by 80bps to 7.8 percent as on 21st December 2011.
The growth in non-performing loans has slowed down compared to the past few years, given that the Bank had witnessed 15 percent and 18 percent jump in NPLs in CY10 and CY09, respectively. As on 30th September 2011, ABL's infection ratio was the lowest among the group of the mid-sized banks.
The total provisioning expenses stayed close to Rs 3 billion in CY11, fell by 26 percent compared to CY10. The provisioning expenses declined on account of lower provision against non-performing loans and provisions for diminution in the value of investments. However, the Bank's coverage ratio improved by around 3.8 percentage points during the period under review to 86.4 percent as on 31st December 2011.
Rating The Pakistan Credit Rating Agency (PACRA) has maintained the long-term and short-term entity ratings of "AA" and "A1+", respectively. "The ratings reflect ABL's robust performance emanating from increasing asset base and sound asset quality. ABL continues to leverage its extensive network for mobilising low-cost deposits, while simultaneously expanding its advances' portfolio, though it continues to have relatively high credit concentration", according to the credit rating agency, adding that: "The positive outlook on ratings recognises ABL's improving profile in the peer universe; wherein deepening of client relationships, further dilution of credit and deposit concentration, and full-scale benefits of advanced technology platform would be key essentials".
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Allied Bank Ltd
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(Rs mn) CY11 CY10 chg
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Mark-up Earned 51,814 44,993 15%
Mark-up Expensed (26,643) (22,428) 19%
Net Mark-up Income 25,171 22,565 12%
Provisioning (3,009) (4,083) -26%
Net Mark-up income after provision 22,162 18,482 20%
Other income 6,950 5,672 23%
Operating revenues 32,121 28,237 14%
Other expenses (14,003) (11,810) 19%
Profit before taxation 15,108 12,343 22%
Profit after taxation 10,140 8,225 23%
EPS (Rs) 11.79 9.56
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Source: Company Accounts
COURTESY: Economics and Finance Department, Institute of Business Administration, Karachi, prepared this analytical report for Business Recorder.
DISCLAIMER: No reliance should be placed on the [above information] by any one for making any financial, investment and business decision. The [above information] is general in nature and has not been prepared for any specific decision making process. [The newspaper] has not independently verified all of the [above information] and has relied on sources that have been deemed reliable in the past. Accordingly, the newspaper or any its staff or sources of information do not bear any liability or responsibility of any consequences for decisions or actions based on the [above information].
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