Bank Alfalah Limited (BAFL) announced its first half 2017 financial results last week, and the profit and loss statement reads a good story. That said analyzing banks on income statements is not necessarily very deep. So, while the picture remains incomplete without the balance sheet numbers, it does offer insight into how things are seemingly moving in the right direction for the bank.
Bank Alfalah has of late consolidated its balance sheet, focusing more on reducing cost of deposits, and curtailing NPLs. The bank seems to have yielded good results on both these counts, as despite a dip in mark-up earned, the net mark-up income still managed to record growth, no matter, how small it was. BAFL has been working relentlessly to improve its deposit mix, and the results how in the improved net mark-up income.
Balance sheet numbers for the 1HCY17 are not out yet to see whether the trend in CASA improvement has continued. But if the P&L is any guide, it shows that it has, even if the deposit growth has slowed down a bit.
The bank’s non mark-up income continued to support the bottom-line ably, backed by strong performance from fee, commission and brokerage income. The single digit non-core income growth was more than covered by administrative expenses – on which the bank was able to keep a very tight lid. BAFL boasts of one of the cleanest books amongst peers, with an infection ratio of under 5 percent, which is more than adequately provided for at over 88 percent. BAFL looks in much better shape to pounce on any opportunity should the private sector credit demand pick up. With low infection, the bank could also venture into the riskier, but high rewarding, SME and consumer portfolio, more aggressively.
The interest rates may have bottomed out, and should present BAFL with a good opportunity to strategize the asset base accordingly. The CPEC spillover should hit Pakistan sooner than later, and the likes of BAFL, will not be too far away from the centre stage.