Allied Bank Limited (ABL) announced Rs2/share as second interim dividend, taking the year-to-date dividend to Rs4/share – while registering 4 percent year-on-year increase in after tax profits for 1HCY21. The asset base continued to grow, having increased by a healthy 16 percent over December 2020. The average yield on earning assets was understandably lower year-on-year, given the sharp correction in the policy rate since the pandemic last year – evident from lower markup earned despite significant volumetric expansion.
No marks for guessing, the bulk of asset expansion has been around the investment portfolio, where government securities constitute 96 percent of the total mix. Treasury bills and PIBs have offered steady risk-free returns as credit appetite has been slow to grow, despite some uptick of late. The bank saw its investment portfolio grow 30 percent over December 2020, crossing the trillion-rupee mark. Effective tenor management in line with interest rate dynamics has been the order of the day.
The advances portfolio, on the other hand saw a rather muted growth of 4 percent over December 2020. This is still better than peer banks reporting negative growth in gross advances during the period, citing lack of genuine credit appetite. The loan book continues to be the cleanest in the industry, with exemplary infection and coverage ratio at 2.7 percent and 94.2 percent, respectively – way better than the industry average of 9.3 percent and 87.6 percent, respectively. The ADR is under 40 percent – still higher than peer banks’ ADR in mid to low-30s.
The deposit growth kept pace with industry average, increasing 8 percent over December 2020 to Rs1.3 trillion. ABL has long been focusing on adding non-remunerative deposits and managed to register 11 percent growth in current deposits during the period. The current to total deposit mix further improved to 40 percent in December 2020 to 42 percent. ABL’s CASA ratio stood at a healthy 86 percent.
The non-funded income continued to offer meaningful contribution to total income, as ABL managed to register double-digit growth in fee & commission income, which the Bank puts down to increased card related from the debit card campaign. The dividend income saw a robust increase of 53 percent year-on-year, in part aided by the end of restriction on dividend distribution that was in place for two quarters in 2020. Massive savings on provisioning charges front further aided the bottomline, as ABL managed to keep the administrative expenses in check.