Bank Alfalah’s PAT stood at Rs. 5.584bn amid conservative provisioning

Bank Alfalah Limited posted operating profit of Rs14.386 billion showed for the half-year ended June 30, 2020, showing a growth of 16.1 percent as compared to the corresponding period of 2019.

In view of the economic impact of the pandemic, the Bank said that it has adopted a more conservative view for provision built up against advances which include subjective provisioning and general provision on account of expected credit weakening amid COVID pandemic. Further, impairment against equity securities was also booked upfront instead of taking benefit of SBP relaxation.

Accordingly, the Bank reported a profit after taxation of Rs5.584bn for the half-year ended June 30, 2020, as compared to Rs6.209bn for the corresponding period, which translates into earning per share of Rs3.14 (Jun 2019: Rs3.50).

Net interest income increased by 7.8pc which was driven by higher average earning assets along with better balance sheet management seeking to mitigate the impacts of spread compression. Non-markup income stood at Rs6.882bn, higher by 38.2pc, with a strong contribution from capital gains of Rs1.733bn and FX income of Rs2.009bn due to favorable exchange rate movement. Fee and commission income declined due to lower transaction volume amid the lockdown in the country.

Operating expenses were contained at 11.3pc compared to the same period last year. This increase was largely driven by staff costs, IT support and maintenance fee, the full-year impact of new branches opened last year along with the overall impact of inflation and rupee devaluation, the bank said. The cost to income ratio of the Bank improved to 51.4pc as compared to 52.1pc during the corresponding period last year.

During the period, the bank in addition to subjective provisioning against few clients took a general provision of Rs2.0bn keeping in view uncertain economic environment. The bank also took a conservative view on impairment against equity securities in Q1 2020, booking 100pc applicable impairment of Rs958.671 million during Q1 2020, despite the central bank allowing banks to stagger the impairment over the year. The rebound in the equity markets during Q2 2020 allowed the bank to book reversals of Rs576.984mn on the disposal of impaired securities, while the benefit of the rebound also reflects in unrealized gain on equities (AFS) of Rs2.340bn as at the end of the half-year.

Total deposits and advances reported at Rs808.09bn and 537.54bn, respectively. The Bank’s focus remains on re-profiling its deposit base. CASA ratio improved to 81.25pc, whereas, gross advances to deposits ratio stood at 66.5pc.

The Bank is in process of issuing Medium Term Note (MTN) in the form of Rated, Secured, Listed, Redeemable Fixed Rate Term Finance Certificates (“TFCs”) of up to PKR 50 billion in multiple tranches having individual instrument maturity of 3 years or more. The instrument will be secured against Government Securities. The issue has been assigned a rating of AAA (Triple-A) by PACRA. The primary purpose behind the issuance of the TFCs is to hedge the Bank’s fixed-rate assets.

At the close of the half-year, the Bank remains adequately capitalized with CAR at 17.67pc.