Allied Bank Ltd 4QCY20 Result Review

Allied Bank Ltd (ABL) has posted consolidated 4QCY20 NPAT of PKR5.7bn (EPS: PKR5.02), up a sharp 18%yoy and 38%qoq. This takes CY20 NPAT to PKR18.4bn (EPS: PKR16.05), up 27%yoy. The result has come significantly above our estimated 4QCY20 EPS of PKR3.0, due to (i) higher than expected NII, (ii) lower admin expenses and (iii) a low 30% effective tax rate in the last quarter. ABL reported a large c.PKR1.6bn provisioning reversal in 4QCY20, likely attributable to a reversal of impairment on equities, in our view – slightly higher than expectations. In addition, ABL announced a final cash dividend of PKR6.0/sh, in line with expectations, taking the full-year payout to PKR8.0/sh.

4QCY20 Key result highlights include:

ABL reported NII of PKR11.2bn, down 14%yoy and 8%qoq, beating our estimate of PKR10.4bn. The sequential reduction is inline with BAFL and lower compared to MCB and BAHL. This was a key reason for the deviation in 4Q results, where interest earned came off by a modest 3%qoq while interest expense rose 2%qoq.

ABL booked provisioning reversal of c.PKR1.6bn vs. our expectations of PKR225mn expense – we think this is likely due to an impairment reversal on equities (which we had taken to reflect in non-funded income). Unlike other banks, it is also possible that ABL has not further increased its general provisions buffer.

Non-interest income rose by 9%yoy PKR3.7bn (up 33%qoq). Fee income remained flat yoy at PKR1.6bn, although up 9%qoq. Dividend income rose a sharp 62%yoy to PKR807mn (above expectations). Capital gains clocked in at PKR685mn vs. estimated gains of PKR1.6bn (likely reflecting as impairment reversal in the provisions head). Fx income came in at PKR368mn, down 3%yoy.

ABL displayed strong cost control with admin expenses coming off by 7%yoy to PKR8.2bn, lower than expectations. Despite the apparent cost control, weak NFI has pushed ABL’s C/I to 55% vs. 47% SPLY and 49% average in 9MCY20. Other highlights include a lower tax rate of 30% in 4Q. Normalizing for this, ABL’s full-year CY20 EPS would have come in at PKR15.42 vs. the reported PKR16.05.

In contrast to MCB and BAFL, which missed our 4Q EPS estimates, ABL has delivered a strong beat. ABL trades at a CY21f P/B of 0.67x and P/E of 5.47x. The bank continues to offer one of the highest dividend yields among covered banks at more than 10%. Our TP for ABL is PKR110/sh (1yr ETR: 45%) and we have a Buy rating.

Courtesy – Intermarket Securities Limited.

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