Bank Alfalah Limited (BAFL) recorded a drop in after-tax profits year-on-year, but beyond the profit and loss numbers, there was enough going on at the balance sheet front, to take heart from, if you are one of the stakeholders. The bank continued to consolidate the balance sheet growth, in line with the changing market dynamics, as an evident asset reprofiling exercise was undertaken in CY20, the results of which are reflected in the markup income composition.

The markup earned and net markup income virtually remained unchanged from last year, as a swift reduction in policy rates by the central bank in response to the pandemic, was the key driver. There was ample growth in the volume of earning assets, and if 9MCY20 balance sheet numbers are any guide, BAFL showed immense interest in government securities.

The investment portfolio by the end of September 2020 had jumped by 80 percent over December 2019, comfortably outpacing the growth in advances. Not only that, but the investment portfolio also crossed the advances in absolute size, as lending opportunities were far and few between, as the pandemic hit the economic activities hard.

Expectedly, the provisioning expenses have taken a big toll on the profitability. Significantly higher provisioning in CY20 was an industrywide phenomenon, as banks raced to make aggressive provisions to ensure prudence.

There was significant activity on the non-core income front, led by the gain on sale of securities. The gain on sale of securities contributed virtually to the entire year-on-year increase, having gone yup by Rs2.2 billion over last year. The bank managed to keep the fee and commission income intact despite the hardships of CY20, which is testament to the rather resilient strong cross-selling at BAFL. Administrative expenses were kept largely in check, aiding the overall cost-to-income ratio. BAFL, after a centra bank imposed hiatus on dividends, announced a final cash dividend of Rs2/share, taking the full year payout to Rs4/share.