Allied Bank Limited (ABL) announced its 1HCY22 results today where the bank reported consolidated NPAT of PkR6.8bn (EPS: PkR5.96) compared to PkR8.9bn (EPS: PkR7.75) in the same period last year. The result came in below our expectations as bank’s Funded Income missed our target. Along with the result, ABL announced a DPS of PkR2.0 which took the cumulative payout during 1HCY22 to PkR4.0/sh. Here are key takeaways from the result.

·         Bank’s core income increased by 19.5%YoY during the period under review. The growth came in lower than what we had anticipated and what the general trend of growth had been in the industry so far and was the prime culprit behind the earnings miss.

·         The non core income, meanwhile, posted a growth of 31%YoY during the same period to PkR10.9bn primarily driven by higher FX income (due to currency volatility) and growth in fee and commission income. Dividend income also made a significant contribution, clocking in at PkR1.4bn during 1HCY22, up 11.5%YoY.

·         Bank recorded provisioning reversal of PkR~500mn during the quarter which took the total reversals made during the period to ~PkR749mn. This trend of provision reversal has been a recurring theme for the bank over the last 7-8 quarters.

·         Administrative expenses grew  by ~14%YoY during 1HCY22, lower than the general inflation in the country and also lower than our estimates and helped shore up the profitability.

·         We have a Sell rating on the stock with a TP of PkR80/sh and offers an upside of 14% on the last close .

 Courtesy – AKD Research