Allied Bank Limited (ABL) announced its CY18 annual financial results, posting a 1 percent year-on-year increase in after-tax profits. The real story lies in the balance sheet growth and consolidation, which has continued to grow from strength to strength. ABL managed to grow its asset base by 8 percent over December 2017, surpassing the industry growth by over 3 percentage points.

While investments continue to take the lion’s share of the asset base – the growth in advances has been particularly impressive. The bank’s ADR stood to near 46 percent as at December end 2018 – up from 42 percent as at December 2017 end. The advances grew by 18 percent over last year, with an absolute increase of Rs66 billion.

The bank’s top line grew well in double digits, backed by an average rise of 136 basis points in the interest rates over 2017, in addition to the volumetric asset growth. The growth in investments was curtailed and the shift was made from long term papers to short term treasury bills, in light of the interest rate scenario. The IDR, as a result, went down from 79 percent in 2017 to 68 percent. The total investments portfolio dipped by Rs27 billion or 3.8 percent.
Faced with squeezed interest margins, the bank’s non-core income responded well. The non mark-up income soared by 30 percent year-on-year, aided by a sizeable jump in gain on sale of securities, which nearly quadrupled year-on-year. All other arms of non markup income such as dividend income, foreign exchange earnings and fee based income saw healthy growth as well.

The bank’s nonperforming loans have also continued to decline, evident from an 11 percent year-on-year decline – resulting in an infection ratio of 3.67 percent, down from 4.85 percent in 2017. The coverage ratio also improved to nearly 97 percent. ABL’s loan book is comparatively much cleaner than most of its peers, and is more than adequately provided for.

On the liabilities front, the growth in deposits was outpaced that of the industry by 3 percentage points, at 11 percent. The bank’s deposit base now stands just shy of the trillion rupees mark. More importantly, the growth in non remunerative deposits clocked in at 15 percent, further improving the CASA ratio from 78 percent last year to 82 percent. ABL seems to e putting in strong deliberate effort to further improve its deposits mix, which could well be a decisive factor in times of thin spreads. The signs of slowdown in the economy may slowdown the advances growth for a brief period, but ABL’s balance sheet has been strengthened enough to weather that kind of a challenge.