Topline Securities organized the Pakistan Day Conference 2025. The conference started with a session on Bank Alfalah (BAFL), where the senior management of the bank briefed participants on the recent financial results and outlook.
§ Management expects that interest rates are very near to bottom, if not bottomed out. Considering this view, the bank has reduced its borrowing (OMO) position from Rs1.1trn in Dec 2024 to Rs556bn in Jun 2025 by liquidating government securities and booking capital gains instead of running the carry positions.
§ Remittances expenses remained elevated as the previous incentive formula of remittances was more favorable for small banks. BAFL is the second largest player in remittances, and to maintain its market share and to support trade business (import), banks spent more on this front.
§ Bank expects overall deposit growth north of 15%, while growth in current accounts would be higher.
§ In the overall investment book, 36% is fixed rate, including both PIBs (yielding 13.7%) and Sukuks (yielding over 14%). While 64% of book is floating. A fair amount of repricing in floaters is expected in 2H2025. This repricing on bring down yield on investments by 75-100bps.
§ Currently yield on advances/Investments stands at 12.2%/12.4% in Jun 2025 vs. 12.1%/13.4% in Mar 2025 and 14.5%/15.3% in Dec 2024.
§ In 2Q2025, the company recorded a relatively higher provision amount due to some subjective changes in one sector. Overall, management expects no headwinds in the credit environment. The bank has Rs3.8bn available in general provisioning. These provisions were done in the past in a high-rate environment in anticipation of some losses; however, these may not be required going forward as the economy is in the recovery phase.
§ The infection ratio of the bank stands at 4.1% in Jun 2025 compared to 4.4% in Mar 2025 and 4.8% in Dec 2024. The coverage ratio stands at 108% in June 2025 compared to 113% in March 2025 and 111% in December 2024.
§ Capital Adequacy Ratio (CAR) ratio stands at 17.67%, comfortably above the minimum requirement.
§ The NPL ratio increased to 4.1% in 2Q2025 compared to 4.4% in 1Q2025. The coverage stands at 107.6% in 2Q2025 from 113% in 1Q2025.
§ Bank has 30% market share in credit card, 21% in Home Loan, 19% in Auto Loan. While in deposits, BAFL has market share of 6%.
§ Currently current accounts constitute 41.5% of total deposit mix in Jun 2025 compared to 38.2% as of Dec 2024.
Courtesy – Topline Research
