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KARACHI: Despite high interest rates and challenging economic conditions, Pakistan’s banking sector demonstrated strong performance.

In the year ending December 31, 2023, the sector’s total assets grew by 31 percent, reaching Rs 45,183 billion, up from Rs 34,530 billion in the previous year. This growth was primarily driven by increases in investments and advances. For the year ended December 31, 2023, investments rose by 41 percent to Rs 25,280 billion, and net advances grew by 4 percent to Rs 11,625 billion.

Allied Bank has demonstrated resilience and achieved significant growth in both its balance sheet and net profits, amid challenging operating conditions and a higher tax regime.

The Bank achieved a 66 percent increase in markup income, reaching Rs 357,307 million for the year ended December 31, 2023, up from Rs 215,469 million in the previous year. This was supported by positive growth in average earning assets, improved spreads, and effective investment duration management.

Despite a challenging increase in deposit rates due to a 751 basis points average policy rate hike in 2023, ABL managed to contain markup expenses at Rs 244,028 million, a 64 percent rise from the previous year. Consequently, net markup and interest income surged by 70 percent to Rs 113,279 million for the year ended December 31, 2023, compared to Rs 66,719 million in the prior year.

Allied Bank’s fee income saw a 31 percent rise, reaching Rs 10,641 million in the year ending December 31, 2023, compared to Rs 8,147 million in the preceding year.

Dividend income rose by 15 percent, reaching Rs 3,543 million for the year ending December 31, 2023, up from Rs 3,088 million in the previous year.

Favourable movement in swap curves contributed to a 15 percent rise in foreign exchange income, which reached Rs 9,167 million for the year ending December 31, 2023, up from Rs 7,948 million in the prior year.

Non-markup and non-interest income experienced an 18 percent increase, amounting to Rs 24,427 million for the year under review, compared to Rs 20,675 million in the previous year.

The increase was primarily due to higher fee income, foreign exchange earnings, and dividend income, though partially offset by a reduction in capital gains.

Capital gains decreased by 40 percent, totalling Rs 845 million for the year ending December 31, 2023, compared to Rs 1,400 million in the previous year. Meanwhile, other income rose to Rs 231 million in the year ending December 31, 2023, up from Rs 93 million in the year ended December 31, 2022.

ABL’s efforts in expanding branch outreach and advancing technological transformation led to a rise in total operating expenses, influenced by higher inflation and unfavourable US/PKR exchange rates. Nevertheless, the Bank managed to limit the increase in operating expenses to 18 percent by continuously automating processes and enforcing internal controls. Operating expenses were recorded at Rs 46,985 million for the year ending December 31, 2023, compared to Rs 39,699 million for the previous year.

For the year under review, the Bank registered a pre-tax profit of Rs 85,757 million, an 84 percent increase from the previous year’s Rs 46,626 million, attributed to notable growth in revenues from both markup and non-markup streams.

The tax charge for the year ended December 31, 2023 increased by 77 percent over the previous year, reaching to Rs 45,074 million. This included an additional tax of Rs 2,955 million on Foreign Exchange Income, designated as Windfall Income for Tax Years 2022 and 2023 (Income Years 2021 and 2022), leading to an effective tax rate for the Bank of 52.56 percent.

A diversified loan and investments portfolios and efficient management of margins and expenses led the Bank to achieve a 92 percent increase in profit after tax, reaching to Rs 40,683 million for the year ending December 31, 2023, up from Rs 21,194 million in the previous year.

Gross advances reached at Rs 794 billion as on December 31, 2023 as compared to Rs 857 billion as on December 31, 2022, while net advances stood at Rs 782 million as on December 31, 2023 reduced from Rs 846 million as on December 31, 2022.

ABL’s strong risk management practices and prudent strategy led to a 0.5 percent decrease in Non-Performing Loans (NPLs), bringing them down to Rs 13,039 million as of December 31, 2023, from Rs 13,104 million as of December 31, 2022.

ABL has one of the industry’s lowest infection ratios, reflecting the quality of its advance portfolio. During the reviewed year, Allied Bank’s infection ratio was 1.64 percent, compared to 1.53 percent in the previous year.

The coverage ratio reached 96.2 percent as of December 31, 2023, up from 90.4 percent in the prior year. Notably, the Bank chose not to take advantage of the forced sale value of collaterals against non-performing loans, a provision allowed under the State Bank of Pakistan’s guidelines, when calculating provisions against NPLs.

The Bank’s investments reached Rs 1,150,318 million as of December 31, 2023, marking a 2 percent increase from Rs 1,123,117 million as of December 31, 2022.

ABL’s total assets amounted to Rs 2,329,317 million as of December 31, 2023, showing a 3 percent rise from Rs. 2,250,973 million as of December 31, 2022. The Bank’s net assets were Rs. 194,254 million as of December 31, 2023, up 52 percent from Rs. 127,811 million on December 31, 2022.

The Return on Assets (RoA) and Return on Equity (RoE) stood at 1.8 percent and 29.4 percent, respectively, on December 31, 2023, an increase from 1.0 percent and 18.4 percent on December 31, 2022. Furthermore, Allied Bank’s Capital Adequacy Ratio (CAR) was 26.21 percent, significantly exceeding the regulatory minimum of 11.5 percent, indicating ABL’s strong capital base.

The Bank’s nationwide branch network provides a strategic advantage, enhanced by the addition of digital and smart branches and the renovation of current locations to elevate customer experience. Allied Bank now operates 1,483 branches, including 1,356 conventional, 127 Islamic branches, and 20 digital touch points.

ABL is robustly equipped to offer round-the-clock banking services nationwide, leveraging a vast array of channels including numerous branches, ATMs, online and mobile banking platforms, and other digital touch points. The Bank’s reach is further extended by a comprehensive network of 1,566 Automated Teller Machines (ATMs), which includes 1,312 on-site ATMs, 249 off-site ATMs, and 5 Mobile Banking Units (MBUs).

Allied Bank’s commitment to digital transformation, strong risk management, enhanced product offerings, and corporate social responsibility initiatives has led to its recognition as “Bank of the Year – Pakistan 2023” for the third consecutive year by “The Banker,” a globally respected financial publication of the Financial Times Group, UK, that has been in circulation since 1926.

Moving forward, Allied Bank is committed to serving its diverse customer base with digitally innovative solutions, while also delivering value to its stakeholders through agility, resilience, and strong governance.

Copyright Business Recorder, 2024

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