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Allied Bank Limited (ABL) declared Rs2/share as interim dividend to go along the first quarterly financial results last week, that saw the after-tax profits largely flat year-on-year. ABL managed to expand the asset base by 8 percent over December 2020, but the sharp decline in policy rate meant the net markup income still declined year-on-year.

The earning assets continue to be dominated by the investment portfolio, which crossed the trillion rupees mark – soaring 25 percent over December 2020. This is significantly higher than the industry average investment growth of 9 percent in the same period. The investment portfolio saw an increase of Rs208 billion over December 2020 – and almost the entire increase was seen in market treasury bills.

Treasury bills now constitute 55 percent of the investment portfolio, having grown 57 percent over December 2020, surpassing share of PIBs which reduced from 49 percent to 40 percent. On the other hand, advances went down 13 percent – some of it is seasonal, while some is due to lack of aggressive credit demand from the private sector. The gross ADR, as a result slid to 35.9 percent, from over 40 percent in December 2020 – and lower than the industry average of 48 percent.

On the liabilities front, the growth was rather muted, yet higher than the industry average growth. The deposit base increased marginally by 1 percent over December 2020 to Rs1.23 trillion. The CASA ratio was maintained at 87 percent, as attracting low-cost current accounts remains at the core of ABL’s deposit strategy.

As the economic activity started to pick up, ABL saw non markup income consolidate on the back of fee & commission income, capital gains, and dividend income, rising significantly. ABL continued to leverage its digital footprint, where the ratio of digital transactions to counter transactions increased to 59:41. The bank’s soundness indicators all appear on strong footings, with a clean loan book that is adequately provided for. Should there by genuine credit demand in the system, hopefully sooner, one may see ABL diverting some of its funds from the safe havens of the government securities to advances.

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