Bank Alfalah Limited outperforms KSE-100 index

KARACHI – Bank Alfalah Limited (BAFL) stock price in the last 15 sessions has witnessed growth of 14.8 percent outperforming the KSE-100 Index during the same period by 11.8 percent. State Bank of Pakistan (SBP) giving a relaxation against provisioning in value of investment in Warid expired on June 30, 2010 forcing it to realize a provisioning of Rs 1.705 billion diminution in investment in Warid.
Consequently, the bank in the fourth quarter of 2010 suffered a loss of Rs 0.39 per share, reduction in CY10 earnings to Rs 965 million (EPS of Rs 0.72) compared to Rs 897 million (EPS of Rs 0.66) in CY09, an increase of 7.6 percent annually. With major impairment expense being expensed out in CY10, it is expected that BAFL net income jumped by 148 percent annually to Rs 1.72 billion (EPS of Rs 1.78) in CY11, said Faisal Khan at AHL.
In 2010, the bank was able to improve its net interest income by 25 percent annually to stand at Rs 13.67 billion. This was mainly achieved through reducing interest expense by three percent annually on back of enhanced CASA deposits whose share in total deposits rose from 53 percent in 2009 to 61 percent in 2010. On the other hand, the bank was able to shed high cost term deposits by 16 percent in annual terms.
Total provisioning in CY10 rose by 4.6 percent as the bank booked impairment on Warid investment to the tune of Rs 1.7 billion. However, provisioning against NPLs registered a annual fall of 39 percent to stand at Rs 2.2 billion. In 2010, non-performing loans (NPL) rose by 13.2 percent to stand at Rs 18.32 million causing the infection ratio to increase from 8.2 percent form 8.4 percent in the previous year.
Non interest income declined by nine percent compared to the corresponding period last year, mainly due to gains realised on the sale of securities to the tune of Rs 586 million in 2009. While the bank’s administration cost exhibited a rise of 15 percent to reach Rs 12.5 billion, as the bank boosted its network to 386 branches in 2010 from 321 the previous year.
In CY11 it is believed that the bank will be aiming to increase its coverage ratio from 62 percent in CY10, he said, adding that exemption by SBP against provisioning for rescheduled Agritech loan will expire in March 31, 2011, which subsequently will result in additional provisioning of Rs 189 million. Consequently, provisioning in CY11 is anticipated to register growth of 27 percent since the same time last year.