KARACHI: Under the challenging and competitive operating environment owing to Covid-19 pandemic, Allied Bank Limited (ABL) sustained focus on its long-term multi-pronged strategy driven towards continuous augmentation of innovative technology-based products and service offerings to customers through enhancing digital touch points, strengthening risk management and optimizing operating efficiencies.
Sharp decline in interest rates led the average policy rate to shrink to 8.95 percent in December 2020 as compared to 11.98 percent in December 2019. Consequently, positive volume variance of earning assets has been fully offset by negative rate variance of mark-up bearing assets. Despite the aforementioned contraction in revenue from earning assets; effective duration management, favourable re-pricing lag and funding cost decrease on account of low-cost deposits has enabled ABL to earn Net Interest Income of Rs 48,421 million during year ended December 31, 2020 as compared to Rs 41,880 million during corresponding period; reflecting a growth of 16 percent.
Amidst the pandemic, ABL together with maintaining diversification of revenue streams through sustained enrichment of services, continued to focus on upholding high service standards by capitalization on the emerging digital financial services, which boosted digital vs counter transaction mix to 65:35 in 2020 as compared to 56:44 in 2019 and facilitated 7 percent growth in fee income which stood at Rs 5,441 million during year ended December 31, 2020 as compared to 5,097 million during year ended December 31, 2019.
Prevailing economic conditions impacted dividend distribution capacity of investee companies due to liquidity constraints. However, the economic pickup post lockdown restricted the decline of dividend income to single digit i.e., nine percent during the year ended December 31, 2020 to stand at Rs 1,656 million.
ABL’s capital gain earnings have augmented by Rs 1,841 million to stand at Rs. 3,420 million during the year ended December 31, 2020 as compared to Rs. 1,579 million during the corresponding period last year; manifesting a strong triple digit growth of 117 percent. On the contrary foreign exchange income has showed a decline of 16 percent owing to relatively stable swap points as compared to last year.
Resultantly, total Non-Markup Income has registered a solid growth of 15% and stood at Rs 12,542 million during the year ended December 31, 2020 as compared to 10,891 million during year ended December 31, 2019.
Despite continuous investment towards technological upgradation to facilitate digital migration, additional spending to comply with socio-economic requisites of COVID-19 pandemic and escalated inflationary pressures, ABL managed to curtail operating expenses to 5 percent during the year ended December 31, 2020.
ABL has taken concrete measures through augmentation of e-banking and conventional banking services all across Pakistan to satiate the needs of diverse range of clientele. During the year under review outreach expanded to 1,402 including 1,279 conventional, 117 Islamic and 06 Digital Branches. Islamic Network was further augmented through addition of 85 Islamic windows at viable conventional branches while concurrent growth in
Automated Teller Machine (ATM) network to reach 1,558 machines inclusive of 1,222 on-site, 333 off-site ATMs and three Mobile Banking Units.
Notwithstanding the strenuous economic outlook, ABL has posted a 22 percent increase in profit before tax to stand at Rs 29,515 million during the year ended December 31, 2020 as compared to Rs 24,242 million in the corresponding period last year. Profit after tax has elevated to Rs 18,029 million for the year ended December 31, 2020; registering a robust growth of 28 percent. Resultantly, earning per share (EPS) of ABL is recorded at Rs 15.75 per share as compared to an EPS of 12.32 per share in the corresponding year.
Industry wide muted growth in Advances has been a manifestation of prevalent economic stress leading to broad based reduction in private sector advances. ABL’s gross Advances stood at Rs 510,174 million as on December 31, 2020; registering a growth of 2 percent in line with Industry. Net Advances stood at Rs 496,432 million as on December 31, 2020 as compared to 485,016 million at the close of the corresponding period; registering a comparatively better growth of 2% as compared to the industry growth of one percent.
Consistent focus on robust risk management framework together with timely introduction of regulatory relief package has led to a drop in Non-Performing advances by Rs 1,693 million which stood at Rs 14,161 million as at December 31, 2020. Consequently, ABL’s infection and coverage ratio stood at a strong level of 2.9 percent and 97.4 percent respectively; well above the industry infection and coverage ratio of 9.2 percent and 87.4 percent respectively for September 30, 2020. No forced sale value (FSV) benefit was availed while determining the provision against Non-Performing advances, allowed under the guidelines of the SBP.
Net investments have elevated by 9 percent to stand at Rs 829,621 million as on December 31, 2020 compared to Rs 757,957, owing to duration optimization and prudent management of investment portfolio.
Total Deposits manifested a vigorous growth of 16 percent to stand at Rs 1,216,678 million. ABL pivoted its concentration towards low-cost deposits which led to Current Non-Remunerative deposits to show astounding growth of 20 percent to stand at Rs 491,010 million as on December 31, 2020, depicting 40 percent of the total deposits mix. Consequently, Current Account and Saving Account (CASA) deposit mix improved from 83 percent in December 31, 2019 to 87 percent in December 31, 2020.
Hence, Assets Base of ABL has stood at a strong level Rs 1,590,458 as on December 31, 2020 as compared to Rs 1,481,121 million as on December 31, 2019 depicting a growth of 7 percent.
Equity Base of ABL was recorded at Rs 131,560 million as on December 31, 2020 compared to Rs 115,351 million as on December 31, 2019; reflecting a healthy growth of 14 percent. ABL manifested a strong Return on Asset and Return on Equity of 1.2 percent and 18.8 percent respectively. Indicative of robust capital positioning of ABL, whereas, Capital Adequacy ratio stood at 25.2 percent compared to a statuary requirement of 11.5 percent.
ABL is poised to achieve its strategic objectives based on the core values of; Integrity, High Performance, Excellence in Service, Innovation and Growth. The Bank also focuses on achieving services leadership, operational efficiency and sustainability in unison with environmental, social and governance performance.-PR
Copyright Business Recorder, 2021
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