Bank Alfalah Limited (BAFL) announced its financial results for the year ending on December 31st, 2017, registering a profit of Rs. 8.61 billion which is up by 8.58% compared to Rs. 7.9 billion during FY 2016.
Growth in overall average earning assets, reduction in funding costs, and continued focus on core fee and commission, all contributed to this growth.
Earnings per share of the company clocked in at Rs. 5.28 as compared to Rs. 4.93 from the previous year.
The bank surprisingly declared a final cash dividend of PKR 1.50/share against no cash payouts during the previous year. It raised additional capital recently through the issue of a new TFC to shore up its reserves.
With the result announcement, the bank also declared that it received an offer for the strategic sale of its off-shore business located in Afghanistan from a local bank of Afghanistan in the country.
Interest and Bond Yields
Despite pressure on interest margins due to a consistent low-interest rate environment and maturities of high yielding bonds, total revenue for the year increased to Rs. 39.1 billion as against Rs. 37.8 billion last year, improving by 3.4 percent.
Interest income of the bank remained flat at Rs. 57.0 billion level, whereas interest expense fell 2% YoY to Rs. 27.64 billion, resulting in a flat NII.
Net reversals for the current year were recorded at Rs. 434.16 million, as against a charge of Rs. 1.083 billion considered last year, which further aided bottom line profitability.
Non-core income of the bank rose 11% YoY despite booking lower capital gains (-35% YoY), mainly on account of exceptional growth in fee and FX income (+20% YoY & +74% YoY respectively). Operating expenses increased by 7%YoY with the highest quarterly increase observed in Q4 FY17.
Total non-mark up expenses were reported at Rs. 25.71 billion as against Rs. 23.97 billion last year, growing by 7.2 percent despite incurring a significant nonrecurring cost.
Administrative expenses during the year surged 6.1 percent to Rs. 25.44 billion against expenses of Rs. 23.97 billion in the previous year.
In order to improve efficiency and to remove redundancies, processes were centralized, and branches where management felt prospects were limited, were closed.
Loans and Deposits
As of December 31, 2017, the Bank’s Non-performing loans (NPLs) ratio stood at 4.2 percent and continues to remain one of the lowest infection ratios in the industry which is better than the industry average. The bank’s coverage ratio improved further to 89.2 percent as against 86 percent at end 2016.
Bank’s deposits improved to Rs. 653.4 billion from Rs. 640.9 billion. The Bank has a gross ADR at 63.8 percent at year-end 2017, one of the highest amongst peers.