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Allied Bank Limited (ABL) pulled out a great 2020 despite the challenges that the pandemic threw its way for most part of the year. The bank managed to post a handsome 28 percent year-on-year increase in after-tax profit, on the back of strong markup income and non-core income growth, and good control over non markup expenses.

The NIM grew admirably by 16 percent year-on-year despite a double-digit decline in markup earned. Recall that the decline in interest rates led to lower average policy rate for 2020, which went down by over 300 basis points to 8.95 percent in 2020. The earning assets increased during the period, but the variance was not enough to offset the rather larger downward variance in the average interest rates – which took the markup earned down.

That said, ABL made enough strides to ensure sizeable growth in NIMs, which grew by 16 percent year-on-year. The bank puts it down to effective duration management of assets, favorable repricing lag and more importantly reduces cost of deposits.

Whilst the pandemic had hit the activity flow hard, particularly in the first half of 2020, ABL has bounced back rather strongly, evident from growth in fee income year-on-year. ABL leveraged its ever-expanding digital financial services to its advantage, and the digital to counter transaction mix improved to 65:35, up from 56:44 from a year earlier. ABL reaped solid gains on account of capital gains which more than double from a year ago, contributing towards improvement in the overall cost to income ratio.

On the balance sheet front, there was not much to show on the advances front expectedly, as ABL’s net advances grew 2 percent from December 2019 to Rs496 billion, slightly improved from the muted 1 percent industry wide growth. ABL’s prudent approach to lending and effective risk management led to the NPLs coming down by over Rs1.6 billion, further improving the already low infection ratio to 2.9 percent. ABL has one of the finest infection and coverage ratio in the industry at 2.9 and 97.4 percent respectively, compared to 9.2 and 87.4 percent for the peers.

The deposit base, meanwhile, grew robustly by 16 percent over December 2019 to Rs1.2 trillion. ABL continues to aim the deposit strategy around low-cost deposits, evident from 20 percent growth in current deposits, which now account 40 percent of the total deposit base. The bank’s CASA ratio stands at a very healthy 87 percent and growing, improved from 83 percent at December end 2019.

As Pakistan takes the slow but sure road towards economic recovery and early signs of growth start to become visible, ABL should be well-positioned to put its strong financials to good use, when the opportunity presents itself.