Though the earnings remain below than market expectation due to heavy provisioning in 4Q2011, cash dividend of Rs1.75/share beat analyst forecast.

Nonetheless, bank’s net income (NII) grew by impressive 36% to Rs18.6bn primarily due to higher asset yield amid higher interest rate and recognition of suspended income to P&L on conversion of circular debt PIB.

Besides, higher top line growth, bottom-line is also supported by higher non interest income of Rs5.4bn, up 15%YoY amid improvement in trading activity.

On the hand, overall provisioning in 2011 remained almost flat at Rs4.3bn compared to last year.

Only in 4Q2011, the bank posted EPS of Rs0.38 compared to preceding quarter (3Q2011) EPS of Rs0.81.

The major reason behind significant decline in earnings is higher provisioning on both advances and investment. Provisioning on advances recorded at Rs1.3bn in 4Q2011 (versus average of Rs0.3mn in last 3 quarters) which includes provisioning impact of Agritech.

Similarly, higher provisioning of Rs1bn on investment may be related to bank’s associate Warid Telecom. We maintain ‘Buy’ stance on BAFL at current levels.

Copyright PPI (Pakistan Press International), 2012