Allied Bank Limited (ABL), one of the top five in the country, had had an amazing run of late, and the CY14 financial results consolidated its position further. From top to bottom, it is hard to find even a single glitch in the profit and loss statement, showing how well ABL has responded to a tough set of conditions.
ABL had adopted the strategy of changing the asset mix earlier towards investments. PIBs and treasury bills of late have been the favoured avenue for banks, for the return they offer is too lucrative for any bank to resist. ABLs ADR and IDR have both remained flattish for quite a while, but in absolute terms, investments have increased at a greater pace than advances. ABLs ADR stood at 44 percent as per the latest available number of 9MCY14, which is in line with peer averages.
Although, the banking spreads are under pressure across the industry, ABL has done well on deposit rationalization to curtail cost of deposits. The banks CASA ratio is healthy and improving by the day, speaking volumes of ABLs efforts to improve the NIMs at a time when return requirement on deposits has increased. ABLs CASA ratio continues to improve and is now in the 70s. The loan portfolio too is of high quality and the NPLs have receded of late. ABL also provides adequately for NPLs. Provisioning charges for the period have increased, which is due to classifying the exposure of Rs2.1 billion (part of the syndicated facility extended to Bycos). The bank proved to be prudent here as it could have delayed this provisioning till second quarter of 2015, but it has maintained its high coverage practice. Since then, Bycos case has been hurting virtually all the big banks, ABL may aspire to start lending aggressively soon.
Always a strong support to the bottom line, the non-core income grew stupendously, mainly at the back of huge increase in gain on sale of securities. The administrative expenses too, have been kept in check and the cost revenue ratio has further improved, whereas other banks are finding it tough to curtail costs.
ABL has one of the better capital adequacy ratios amongst the peer banks and its asset composition makes it more ready than others to gear up for a likely shift towards advances. As interest rates slow down, ABL can take better advantage of situation. Double digit growth may be a tough thing to achieve, but if any bank could achieve it, it is ABL, which can boast of having a near perfect balance sheet.
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Allied Bank Limited ( Consolidated P & L )
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Rs (mn) CY14 CY13 chg
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Markup earned 67,003 54,223 24%
Markup expenses 38,830 32,562 19%
Net Markup income 28,173 21,661 30%
Provisioning/(Reversal) 1,609 565 185%
Net Markup Income after provisions 26,564 21,096 26%
Non Mark-up / Interest Income 13,185 9,951 33%
Operating revenues 39,749 31,047 28%
Non Mark-up / Interest expenses 17,316 16,116 7%
Profit before taxation 22,433 14,931 50%
Taxation 7,231 148 4782%
Profit after taxation 15,202 14,783 3%
EPS (Rs) 13.28 7.37
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Source: KSE Notice