Allied Bank Reports Huge Profits in 9 Months of 2020 Despite COVID-19

Allied Bank Ltd announced its financial results for the nine months that ended on September 30, 2020.

Despite the challenging economic and banking dynamics, ABL posted a profit of Rs. 12.410 billion for the nine months as compared to Rs. 9.40 billion in the corresponding period of 2019; registering a growth of 32%.

Consequently, earning per share (EPS) of ABL stood at Rs. 10.84 per share as against an EPS of 8.21 per share in the corresponding period.

A sharp decline in interest rates led the average policy rate to contract to 9.6% as against 11.6% in the corresponding period. Effective duration management, favorable repricing lag, volumetric growth along with a change in the mix has enabled the bank to earn Net Interest Income of Rs. 37.185 billion during the nine months period ended September 30, 2020; reflecting a growth of 29%.

COVID-19 pandemic envisaged technological breakthroughs by accelerating the digital transformation of organizations to ensure uninterrupted business activity while addressing social distancing and adaption to the new normal. ABL’s constant emphasis on capitalizing on the emerging digital financial avenues along with maintaining diversification of revenue streams through sustained enrichment of services suite has facilitated the growth of 10% in Fee income which stood at Rs. 4.029 billion during the nine months period ended September 2020 compared to Rs. 3.668 billion in the corresponding period.

Dividend income observed a downturn of 36% on the back of prevailing economic slowdown which has obstructed investee companies’ dividend distribution capacity due to liquidity constraints. ABL recognized a capital gain of Rs. 2.838 billion in the period under review as against Rs. 853 million in the corresponding period, reflecting a growth of 233%. Adverse movement of swap points was observed on account of decline in foreign investment portfolio and adverse impact on Special Convertible Rupee Accounts.

However, Foreign exchange (FX) income which registered a loss of Rs. 188 million in the first quarter of 2020; has reached Rs. 1.295 billion. Resultantly, total non-markup income augmented by 17% to stand at Rs. 9,146 million as compared to Rs. 7.820 billion in the corresponding period in 2019.

ABL’s operating expenses growth curtailed to 9% during the nine-month period that ended September 2020, much lower than 18% growth over the same period last year, despite continuous investment towards technological upgradation to enable digital migration, increased spending to address socio-economic influence of COVID-19, currency devaluation and hiked inflationary pressures.

In line with contraction witnessed in overall industry advances as a consequence of economic slowdown; ABL’s gross advances portfolio closed at Rs. 455.596 billion.

The persistent focus on maintaining a robust risk management framework coupled with the prompt introduction of regulatory relief packages to assist industry growth and mitigate liquidity risk has led to a decline of Rs. 1.337 billion in Non-Performing advances that closed at Rs. 14.517 billion as on September 30, 2020 as compared to Rs. 15,854 million in December 2019.

In line with rapidly transforming digital space in Pakistan towards more convenient and flexible ways of banking, ABL thrives towards a hybrid expansion strategy involving digital and Brick and mortar banking operations, together with resorting more focus towards e-banking.

Consequently, the transaction mix of digital and counter-based services improved from 46:54 as of December 31, 2019 to 57:43 as of September 30, 2020.

Overall deposits

Overall deposits have increased by 7% to stand at Rs. 1.122 trillion as of September 30, 2020. ABL pivoted its concentration towards low-cost deposits which is evident from a growth of 11% in non-remunerative current deposits. Resultantly, the Current Account and Saving Account (CASA) deposit mix has improved to 86% as of September 30. 2020 from 83% as of December 31, 2019.

The funding mix was optimized during the period, which has resulted in a decline of Borrowings from Rs. 266,448 million as of December 31, 2019, to Rs. 145,896 million as of September 30, 2020 i.e. 45%. Resultantly Total Assets of the Bank stood at Rs. 1,441,688 million as of September 30, 2020 as against Rs. 1,481,121 million as at December 31, 2019 i.e. 3%.

ABL’s Equity base stood at a robust level of Rs. 122,048 million as of September 30, 2020; reflecting a growth of 6%. While Return on Equity and Return on Assets manifested a strong level of 17.7% and 1.1% respectively. The Capital Adequacy Ratio of the Bank stood at 27% against a statutory requirement of 11.5% which is indicative of a strong Capital positioning of Allied Bank.