Allied Bank Limited (ABL), one of the top five in the country, has had an amazing run of late, and the 9MCY14 financial results consolidated its position further. From top to bottom, it is hard to find even a single glitch in the profit and loss statement, showing how well ABL has response to a tough set of conditions.
ABL had adopted the strategy of changing the asset mix earlier towards investments. PIBs of late have been the favoured avenue for banks, for the return they offer is too lucrative for any bank to resist. ABLs ADR and IDR have both remained flattish for quite a while, but in absolute terms, investments have increased at a greater pace than advances.
Although, the banking spreads are under pressure across the industry, ABL has done well on deposit rationalisation to curtail cost of deposits. The banks CASA ratio is healthy and improving by the day, speaking volumes of ABLs efforts to improve the NIMs at a time when return requirement on deposits has increased.
The loan portfolio too is of high quality and the NPLs have receded of late. ABL also provides adequately (92 percent) for NPLs. Provisioning charges for the period have come down and ABL actually booked reversals, further aiding the profits.
Always a strong support to the bottom line, the non-core income grew stupendously, mainly at the back of huge increase in gain on sale of securities. The administrative expenses too, have been kept in check and the cost revenue ratio has further improved, whereas other banks are finding it tough to curtail costs.
ABL has little to worry about in the days to come. Even if the interest rates are to come down, it is well equipped to handle the situation and reap capital gains on investments. The relatively cleaner loan portfolio also keeps the door ajar should there be a need for change in asset mix strategy.
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