Commercial Banks: ALLIED BANK LIMITED - Year Ended June 30, 2006 (Audited)
Allied Bank Limited (ABL), incorporated in Pakistan as a scheduled bank, is engaged in commercial banking and related services. ABL is listed on all the stock exchanges in Pakistan. The bank operates a total of 742 (December 31, 2005: 741) branches in Pakistan.
The medium to long term rating of the bank rated by JCR-VIS is "A+" (Single A Plus) with a positive outlook while its short term rating is "A1+". The Board in their meeting held on October 30, 2006 approved liquidation of Allied Management Services (Private) Limited (AMSL), consequent to merger of First Allied Bank Modaraba (FABM, earlier managed by AMSL) into the bank.
The Statutory Auditors in the last paragraph of their report to the members state: "The corresponding figures in the accounting financial statements of the bank as at December 31, 2005 include balances of First Allied Bank Modaraba, which were reviewed by another firm of Chartered Accountants whose report dated February 17, 2006 expressed an unqualified review report thereon".
The merger of First Allied Bank Modaraba with and into ABL has been explained in notes to the financial statements. According to the details provided therein, the Board of Directors, in their meeting held on April 28, 2006, decided to merge FABM with ABL. The effective date of amalgamation was fixed at January 1, 2006. The Scheme of Amalgamation was adopted by the shareholders on June 24, 2006. The State Bank of Pakistan approved the Scheme in principle on May 27, 2006. The Lahore High Court sanctioned the above Scheme vide its order dated July 12, 2006.
The bank has applied "uniting of interest" method to account for the amalgamation ie the financial statement items of bank and FABM for all periods presented are included in these financial statements as if they had been combined from the very beginning of the earliest period presented i. e. January 1, 2005, except for the treatment accorded to 8,400,000 ordinary shares of Rs 10 each, determined pursuant to the Scheme of Amalgamation in accordance with the share-swap ratio stipulated therein.
Authorised capital of ABL is Rs 10 billion, comprising 1,000 million shares of Rs 10 each. As on December 31, 2006 the paid up capital was Rs 4.489 billion which was held by 21,254 shareholders, of which 21,061 individuals (general public) held over 8% shares. Ibrahim Agencies (Pvt) Limited and Ibrahim Fibres Limited together held over 37% shares. The Directors, CEO, and their spouse and minor children held nearly 36% interest. Holding by the government entities was under 2%. Rest of the shares were distributed among a number of corporate entities including banks and DFIs.
Total assets of ABL increased by 31% to Rs 252 billion on December 31, 2006 compared to Rs 193 billion on December 31, 2005. Increase in assets has occurred in Lending to Financial Institutions (230%), Advances (30%) and Operating Fixed Assets (37%). The increase in assets has been largely financed through 28% increase in Deposits to Rs 206 billion (82% of Total Assets) as on December 31, 2006 compared to Rs 161 billion (84% of TA) as on December 31, 2005 and 90% increase in Borrowing from Financial Institutions during the year.
There has been significant change in the composition of investments as on December 31, 2006. Of the total investments ABL now has 40% in Held to Maturity Securities (December 31, 2005: 80%) and 59% in Available for Sale Securities (December 31, 2005: 18%).
ABL's Advances as on December 31, 2006 at Rs 144 billion were 57% of Total Assets (2005: 58% of TA). On this date, gross NPLs were Rs 10.479 billion (2005: Rs 12.699 billion). In percentage terms gross NPLs on December 31, 2006 were 6.9% of gross Advances (2005: 10.6% of GA). Provision has been made as required. The level of NPLs is still high and ABL must not lower its guard because some doubtful loans have the tendency to stay under cover for sometime due to different reasons. A prudent policy for ABL would be that the management remains extra vigilant in the appraisal and monitoring of all loans.
According to note 42 to the financial statements, Capital Adequacy Ratio of the bank as on December 31, 2006 was 12.80% (2005: 12.17%) as against prescribed minimum equivalent to 8% of the risk weighted assets of the banking company.
ABL's equity including Surplus on Revaluation of Assets on December 31, 2006 stood at Rs 17.688 billion (7% of TA) compared to Rs 14.550 billion (7.6% of TA) as on December 31, 2005. With subordinated loan of Rs 2.500 billion on December 31, 2006 counting towards equity, the ratio of Total Equity to Total Assets rises to 8%. It is felt that to further strengthen bank's financial position, the sponsors need to inject fresh cash equity.
Total mark up/interest income of ABL for the year ended December 31, 2006 increased by 74% to Rs 17.215 billion compared to Rs 9.892 billion for 2005. Total mark up-interest expense represented 39% of total mark up income for 2006, compared to 20% for 2005.
Non-mark up income of for 2006 was 26% higher at Rs 2.449 billion as against Rs 1.940 billion for 2005. The year 2006 was closed with After-Tax Profit at Rs 4.397 billion, registering an increase of 42% over net profit for 2005 at Rs 3.090 billion. ROE for the year at 24.9% (2005: 21.2%) is attractive. Performance statistics are given below. The bank appears to be poised for better performance in the coming years.
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Performance Statistics (Audited)
(Rs million)
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Balance Sheet (As on December 31,) 2006 2005
(Restated)*
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Total Assets: 252,027 192,574
Cash, balances with banks: 24,745 18,035
Investments-Net: 46,953 44,927
Advances-Net: 144,034 111,207
Borrowing from fin. Institutions: 18,411 9,694
Deposits, other accounts: 206,031 161,410
Total Liabilities: 234,339 178,024
Net Assets: 17,688 14,550
Share Capital: 4,489 4,489
Reserves & Un-app. Profit: 11,741 8,425
Equity: 16,230 12,914
Surplus on Revalue, Assets: 1,458 1,636
Equity incl. Revalue Surplus: 17,688 14,550
Advances-Gross: 151,705 119,866
Gross NPLs: 10,479 12,699
Total Provision: 7,657 8,649
Conting. & Commitments: 71,366 46,493
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Ratios: 2006 2,005
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Cash & bank/Total Assets: 10% 9%
Investments/Total Assets: 19% 23%
Advance-Net/Total Assets: 57% 58%
NPLs/Advances-Gross 6.9% 10.6%
NPLs Prov./Advances-Gross: 5.1% 7.2%
Deposits/Total Assets: 82% 84%
Total Liabilities/Total Assets: 93% 92%
Total Equity/Total Assets: 7.0% 7.6%
Deposits/Equity-Times: 11.6 11.1
Advances/Deposits: 70% 69%
Investments/Deposits: 23% 28%
Conting.& Comm./Equity-Times: 4.03 3.20
Book Value Per Share: 39.40 32.41
KSE Price/Share (12-06-07) Rs: 127.80 -
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Income Statement 2006 2005
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Markup-interest earned: 17,215 9,892
Markup-interest expensed: 6,793 2,025
Net Markup-interest income: 10,422 7,867
Provisions and write offs: -704 -580
Net mark up income (aft. Prov.): 9,718 7,287
Total non-markup income: 2,449 1,940
Income bef. Admn. Exp.: 12,167 9,227
Admin Expenses, etc: 5,506 4,393
Profit before Taxation: 6,661 4,834
Current & deferred tax: 2,264 1,744
Profit after taxation: 4,397 3,090
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Ratios: (Annual Basis) 2006 2005
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Markup earned/Total Assets: 6.8% 5.1%
Net Markup Income/TA: 4.1% 4.1%
Net markup (aft. Prov.)/TA: 3.9% 3.8%
Non-Markup Income/TA: 1.0% 1.0%
Income before AE/TA: 4.8% 4.8%
Admin Expenses/TA: 2.2% 2.3%
Profit before Taxation/TA: 2.6% 2.5%
Profit after taxation/TA: 1.7% 1.6%
Profit after tax/Total Equity: 24.9% 21.2%
EPS-(year-end paid up) - Rs: 9.80 6.88
Price/Earning Ratio: 13.05 -
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Cash flow Summary 2006 2005
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Net Cash flow, Operations: 9,328 -5,893
Net Cash flow, Investing: -4,241 11,663
Net Cash flow, financing: 1,403 0
Exchange impact on cash: 124 -22
Change in Net Liquidity: 6,614 5,748
Net Liquidity at beginning: 17,753 12,129
Net Liquidity at end: 24,367 17,877
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(*Comprise (a) balances of ABL and (b) balances of FABM).
COMPANY INFORMATION: Chairman: Mohammad Naeem Mukhtar; Director: Sheikh Mukhtar Ahmed; President and CEO: Khalid A. Sherwani; Company Secretary: Zia Ijaz, FCA; Legal Advisors: Haider Mota and Company, Advocates and Solicitors; Head Office/Registered Office: 8-Kashmir/Egerton Road, Lahore; Central Office: Bath Island, Khayaban-e-Iqbal, Main Clifton Road, Karachi-75600; Auditors: 1-Ford Rhodes Sidat Hyder & C., Chartered Accountants; 2- M. Yousuf Adil Saleem & Co, Chartered Accountants; Web Address: www.abl.com.pk
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