September 3, 2020 (MLN): Bank Alfalah Limited (BAFL) on Wednesday shared its insight on the Medium Term Note Program (TFCs amounting to PKR 50 billion), stating that the objective behind the program was to hedge consumer and mortgage portfolios.
This was said during BAFL’s analyst briefing, which was conducted to discuss the latest financial performance as well as the ongoing ventures of the bank.
According to Arif Habib Limited, the management said that multiple tranches will be issued with maturities of three years or more and will be listed on PSX. Furthermore, it said that the product will help spread the maturity profile of liabilities while also helping develop Pakistan’s capital markets and providing an avenue for local firms to fund long term financing needs through fixed instruments. So far, the positive and feedback on the program have been welcoming and the first tranche is about to close successfully.
Speak in detail about the performance of the bank during the quarter ended June 30, 2020, the management said that hefty provisioning and quarterly decline in Net Interest Income had prevented improvement in BAFL’s profitability.
To recall, the bank had reported a Profit after Tax figure of Rs. 2.89 billion (EPS: 1.63), i.e. around 8.6% lower than the figures recorded in the same period of last year. On the other hand, the half-yearly profits stood at Rs. 5.8 billion (EPS: 3.25), showing a decline of 10% as compared to the same period of last year.
The Bank’s Net Interest Income showed a mere growth of 5.5%, whereas the total Non-Interest Income depicted a rise of 21%. The substantial rise in the latter was a result of aggressive growth in FX income by 1.2x, as well as an increase in the share of profit from associates by 1.45x.
As compared to the previous quarter, the NII showed a decline of 2% on account of several one-offs, such as early re-pricing instructions from SBP on consumer/SME book, suspension of mark-up income on subjective classifications, and the suspension of mark-up income from certain sectors as instructed by the Central Bank of Bangladesh.
Talking about the hefty provisioning expense of Rs. 3.3 billion that had impacted the overall performance, the management stated that around Rs. 1.4 billion accounted for subjective provisioning as a result of subjective classifications done by the bank while reclassifying certain names.
Nonetheless, the management was content with the cost/income ratio, which settled at 48% during the quarter as compared to the ratio of 56% recorded in the previous quarter and 54% in the same period of last year.
The management further informed that the bank will continue focusing on a balance between volumes and mic of the deposit base. The strategy does not mind a fall in CASA ratios as long as that means availing lucrative opportunities prevailing in the market. It is pertinent to mention that the bank’s CASA as of now stands at 80% as compared to 85.5% recorded in the same period of last year.
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