Allied Bank Limited announced an interim dividend of PKR 2.0/sh

Allied Bank Limited (ABL) announced its 2QCY21 results today, reporting above expected earnings of PKR 4.7Bn (EPS: PKR4.1), ↑8/17% YoY/QoQ respectively. Along with the result, the bank announced an interim dividend of PKR 2.0/sh (1HCY21 pay-out: PKR 4/sh).

Key highlights of the result are summarized below:

Net Interest Income (NII) declined by 9% on a YoY basis in 2QCY21 on account of NIMs compression due to sizable interest rate over the past year. On a QoQ basis, NII increased by 13% which we opine must be due to improving investment income. Going forward, NIMs accretion is forecasted to remain limited because of the low interest rate environment, though balance sheet expansion will continue to support the top line, in our view.

Non funded income increased by 6.6% on a YoY basis despite slightly lower capital gains and poor forex income. The surge emanated from rising fee income which shot up by 32.7% YoY. We attribute the rise in fee income to improved branch banking income, debit card fee and trade related commission income. Capital gains continued to support non-core income growth having clocked–in at PKR 1.2Bn, slightly lower than PKR 1.3Bn booked last year. We expect healthy gains to stem from federal government securities which now stand at ~PKR 1.0Trn having undergone a sizable build-up from ~PKR 640Bn last year. On a sequential basis, NFI increased by 7.1% despite flattish fee income on the back of improved dividend (up 17% QoQ), forex (up 69% QoQ) and other income (up 21x QoQ).

Provisioning reversals continued in this quarter as well having clocked-in at PKR 171Mn against a charge of PKR 1.5Bn in the SQLY. Though we await further clarity on the reversals, we believe these to relate to bad loan recoveries given the pristine quality loan book of the bank.

Admin expenses of the bank clocked-in at PKR 8.5Bn in 2QCY21, having risen by 11.2% YoY, while on a sequential basis, the increase was 5.2%. As a result, cost to income ratio rose to 52.0% in 2Q from 44.7% last year. Effective tax rate was on the higher side in the outgoing quarter having clocked-in at 40.9%.

Courtesy – BMA Capital Management Ltd

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