Allied Bank – grows right

The second quarter may have been marred by the pandemic, but Allied Bank Limited (ABL) marched on with its stellar performance, adapting well to the changing realities. The balance sheet numbers will be known shortly, but there has been a considerable volumetric expansion in average earning assets. Much in line with the industry trend, asset reprofiling was at the forefront, enabling ABL to register a healthy 33 percent growth in net markup income.

The low interest rates which were pushed at a great pace due to the pandemic led ABL to timely diversify its investment portfolio. The trend in the investment portfolio has shifted from short-term papers to longer tenor government securities. On the advances front, ABL further reduces its non-performing portfolio from Rs15.9 billion in December 2019 to Rs 15.1 billion.

The infection ratio stood at a very healthy 3.4 percent, which was very adequately provided for at over 97 percent. ABL continues to boast of the finest infection and coverage ratio among peer banks. In view of the pandemic situation, ABL made a general provision of Rs1.3 billion, whereas Rs588 million were charged on account of diminution on equity investment in the first quarter. The bank did not avail FSV benefit on provisions for NPLs.

The non-core income contributed significantly towards the bottomline, as ABL managed to sail smoothly during the lockdown. Not many banks have been able to maintain the non-markup income during the period, but ABL managed a healthy 26 percent year-on-year growth, despite significant reduction in foreign exchange income.

ABL leveraged its digital banking to great advantage, as despite lower economic activity, it managed to grow its fee income. The bank registered over 45,000 customers to mobile banking, that led to increased digital activity, as evidenced by nearly 0.7 million utility bill payments through digital services. The digital banking transactions mix was increased to 62 percent, which helped the fee income grow by 10 percent year-on-year. The dividend income was hard to come by, but ABL did exceptionally well on recognizing capital gains, which went by over six times year-on-year.

The CASA ratio improved to 86 percent, versus 81 percent in the same period last year. The growth in non-remunerative deposits was 6 percent year-on-year, helping ABL reduce the cost of deposits, and taking the share of zero-cost deposits to 39.4 percent at the end of 1HCY20. The administrative cost increase was also kept in check, despite inflation and costs associated with dealing with the pandemic. The bottomline post tax grew by a handsome 38 percent, the foundations of which were laid in a solid topline performance.