Allied Bank Limited (ABL) posted its first half financial results for CY24, declaring an interim cash dividend of Rs4/share – taking the year-to-date payout to Rs8/share. The after-tax profits jacked up a massive 36 percent year-on-year. Volumetric expansion in asset base, double-digit growth in non-core income, significant provisioning reversals – all contributed towards the increase in after-tax profits.
The markup income soared 14 percent year-on-year, largely on the back of positive volumetric growth in average earning assets, improving spreads, and effective duration management of investments. Advances growth has been slow across the industry, given the overall macroeconomic situation – as evident from a 1 percent contraction in gross advances over December 2023. The ADR dipped to 41 percent as at June end 2024, down from 46.6 percent at the end of 2023.
Investments increased appreciably over December 2023, as PIBs remained the favored sovereign instrument. The increase mainly stems from increased exposure in Pakistan Investment Bonds and higher revaluation gains, a little bit of the sheen form which was taken away by declining treasury bills. The Investment to Deposit Ratio (IDR) stayed virtually unchanged from December 2023 at around 68 percent.
On the liabilities front, Allied Bank reported a healthy increase of 12 percent over December 2023, in deposit base to over Rs1.87 trillion as at June end, 2024. Breaking away with the industry trend, ABL witnessed the fastest paced increase in term deposits at 24 percent over December 2023. The current account growth stayed contained at 6 percent whereas saving deposits grew 10 percent. As a result, the CASA ratio slipped a little from December 2023 – by nearly 2 percentage points at around 83 percent.
Non-funded income grew 18 percent year-on-year, led by strong 28 percent year-on-year growth in fee and commission income. Income on capital gains nearly quadrupled from a year ago, mainly on the back of higher gains on Euro bonds and federal government securities. On the other hand, administrative expenses growth was restricted to 17 percent – lower than the period average inflation. The cost to income ratio stayed largely unchanged from a year ago. The reversal in provisioning charges contributed most significantly to the bottomline, as reversals in excess of Rs3 billion were booked during 1HCY24 versus expenses in excess of Rs2.7 billion a year ago.
With the interest rate cycle finally having started to reverse, a gradual change in asset composition may happen in 2HCY24. That said genuine credit appetite from the private sector may take longer to return, given the headwinds in macroeconomy.
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