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Pandemic it maybe. But panic it is not. Not at Allied Bank Limited (ABL). The bank announced its financial results for 9MCY20 earlier in the week, registering a 30 percent year-on-year increase in pretax profits, despite flattish topline. ABL managed the earning assets well enough to extract a sizeable 29 percent year-on-year jump in NIMs, despite no growth in markup earned.

The average policy rate during the period dipped sharply to 9.6 percent from 11.6 percent in the same period last year. But a combination of volumetric asset base expansion, favorable repricing, better asset mix and most importantly the asset tenor management – all chipped into what is more than a sizeable growth in NIMs.

The investment portfolio grew by 4 percent over December 2019 to Rs 788 billion as at September end 2020. The significantly altered interest rate dynamics led to a major shift in investment profiling, where PIBs were more than doubled from Rs154 billion as at December end 2019, to Rs381 billion. The shift from treasury bills to PIBs has been witnessed across the industry, and ABL was no exception, taking the PIBs’ share in total investments to 49 percent as at September end 2020, from just over 20 percent by end December 2019. It seems the bank’s research arm is reading the picture right, as ABL’s response in terms of timing the portfolio switch from short-term to long-term was one of the best in in the industry.

The slowdown in economic activities naturally led to subdued appetite for loans from the private sector. ABL’s gross advances as a result, shrunk by 6 percent over December 2019 to Rs456 billion. The combination of ABL’s prudence and storing risk management framework, alongside timely relief measures announced by the central bank to limit the liquidity risk – led to a drop in NPLs by over Rs1.3 billion.

ABL continues to have one of the cleanest and well provided loan books among peers. The infection and coverage ratio for the period stood at 3.2 percent and 95.7 percent, respectively – comfortably better than the industrywide ratio of 8.9 percent and 85 percent. Aggressive provisioning in light of potential losses arising from Covid amount to over Rs1.3 billion, which take the provision included coverage ratio to over 104 percent.

The liability side saw a rather modest growth, but more importantly, it was aimed in the right direction, as growth in non-remunerative deposit was much higher at 11 percent. The CASA ratio has improved further to 86 percent, from 83 precent as at December end 2019.

While economic activities remained low and there was a visible drop in footfall for most of the 9M period, ABL leveraged its digital banking well enough to muster double digit growth in fee income, which kept the non-funded income high. Capital gains grew by over three times year-on-year, which more than offset the drop observed in dividend income and on account of foreign exchange. The bank kept a tight lid on operating expenses, leading to improved cost to income ratio. From what it seems, ABL is in as good a shape as ever, and any uptick in economic activity should lead to more avenues of growth for the bank.