A bullish trend has been witnessed at the local bourse in the past week- even if it was largely driven by foreign investors. For some it was anticipation of the upcoming results season.
Yesterday saw the results kick-off of the banks with Allied Bank Limited (ABL) which announced earnings for the first nine months of the year. In line with market expectations, ABL posted earnings per share of Rs7.48, capturing a rise of nearly 17 percent over the corresponding period.
Given the prevalent high-interest rate environment, the bank posted net-interest income growth of just over 21 percent. While rather conservative lending policies guarded against aggressive growth in the lending portfolio, investment income from high yielding government securities constituted much of ABLs growth.
Sustained efforts from the bank to improve its deposit-mix bore fruit as the banks ratio of current-to-saving account (CASA ratio) improved to 57.7 percent up from 55.7 over the previous year. And keeping in line with ABLs cautious lending approach the ADR fell nearly 7 percent in the first nine months of the calendar year.
Pressure on the asset quality was reflected by a 16.5 percent rise in non-performing loans to date in the current calendar year. But strong risk management policies have led to an increase in provisioning of nearly 22 percent in the first nine months.
Still, the infectious ratio of ABL stands at just over 8 percent. The ratio has seen an increase of nearly 150 basis points since the beginning of the year, almost two-thirds of which accounts for in the last three months, which is a point of concern.
Nonetheless, it is much less than its peers, depicting the sound lending policies of the bank and its tilt towards the less risky big corporations.
Given subdued economic activities lately income from investment banking - project finance and advisory has remained in the shadows for much of the last year. And in the absence of the large capital gains from the equity market in the previous year, other income decreased sharply.
One-off expenses in the voluntary retirement scheme caused the non-mark-up expenses to grow by more than 10 percent in the first nine months. Given investments in technology improvements in the banks system, the overall impact of a highly inflationary environment was largely kept in check by ABLs management.
ABL, just like its peers, is bracing itself for a potential surge in non-performing loans due to the floods. But as reconstruction begins, Allied Bank may be set to benefit from it given its exposure to the cement sector.
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Allied Bank Limited (ABL)
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P&L (Rs in million) 9MCY10 9MCY09 % chg 3QCY10 3QCY09 % chg
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Mark-up earned 33,254 30,419 9.3% 11,407 10,419 9%
Mark-up expensed (16,704) (16,791) -0.5% (5,436) (5,478) -1%
Net mark-up Income 16,550 13,628 21.4% 5,971 4,941 21%
Provisioning (3,153) (3,339) -5.6% (1,025) (882) 16%
Net mark-up income after provisions 13,397 10,290 30.2% 4,946 4,059 22%
Non-mark-up income 3,656 4,695 -22.1% 1,036 1,331 -22%
Operating revenues 20,207 18,323 10.3% 7,006 6,272 12%
Non-mark-up expenses (8,304) (7,509) 10.6% (2,749) (2,542) 8%
Profit after taxation 5,849 5,013 16.7% 2,229 1,953 14%
EPS (Rs) 7.48 6.41 2.85 2.50
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Source: KSE notice