Allied Bank: Record Profits

Allied Bank Limited (ABL) posted its yearly financial results for CY23, declaring a final cash dividend of Rs4/share – taking the full-year payout to Rs12/share. The after-tax profits almost doubled year-on-year, despite an effective tax rate in excess of 50 percent. Volumetric expansion in asset base, improved deposit mix, and higher interest rates – all contributed towards the 92 percent year-on-year increase in after-tax profits.

The markup income soared 66 percent year-on-year, largely on the back of high variance in the average policy rate. Advances growth has been slow across the industry, given the overall macroeconomic situation – as evidenced by a 10 percent dip in gross advances over December 2022, by the end of September 2023. The ADR had dipped to under 45 percent by September end of 2023 and is likely to have stayed thereabouts, as one awaits the full-year balance sheet details.

Most banks have resorted to improvement in deposit mix – in a bid to counter the cost of deposits in the face of the rising policy rate. ABL had reported an increase of 12 percent in deposit base to over Rs1.7 trillion as of September end, 2023. The current account growth outpaced all other categories – as the current account to total deposit inched up to 41 percent, and CASA went past 81 percent. The average cost of deposits is believed to have grown at a lesser pace than that of an increase in policy rate – owing to improved deposit mix.

Non-funded income soared by a healthy 18 percent year-on-year, led by strong growth in fee and commission income. Foreign exchange income and dividend income also grew appreciably from last year. On the other hand, administrative expenses were kept largely in check at just 19 percent. This speaks volumes of the investment in efficient systems made in yesteryears by ABL – that seem to now be reaping the fruit – as the growth in administrative expenses stayed well below the average inflation rate for the year. The cost-to-income ratio, as a result, has improved significantly by over 10 percentage points – paving the way for a mammoth 84 percent year-on-year growth in pretax profit.

Pakistan’s economy may well have come out of the rut and the worst may well be behind us – but nothing so far suggests a huge shift in fortune for the better – in 2024. The political stalemate and a very weak coalition government in the making – are already indicating hard times ahead. Not that ABL has relied heavily on private sector advances to seek profits, as other avenues remain conducive enough for record profits – year after year.