Bank Alfalah announced a final cash dividend of PKR5.0/sh

BAFL has posted 4QCY23 consolidated NPAT of PKR9.0bn (EPS: PKR5.74), up 120%YoY and flat QoQ. This takes CY23 NPAT to PKR36.5bn (EPS: PKR23.15), up 98%YoY. While the result is lower than our estimated 4Q EPS of PKR6.0/sh, the deviation stems from a high effective tax rate of 66% – excluding which this would be a strong earnings beat.

BAFL has prudently booked tax provision on windfall profits. Core revenues are delivering above expectations, particularly non-funded income which has crossed the PKR10bn/quarter mark (up a massive 2.3xYoY). BAFL announced final cash dividend of PKR5.0/sh which is significantly higher than our estimated PKR3.50/sh as well as street consensus. This takes the full year payout to PKR8.0/sh.

4QCY23 Results Highlights:

NII clocked in at PKR35.0bn, up 10%QoQ and up 50%YoY – better than our estimated PKR32.0bn. This is likely given the swift growth in the deposit base. BAFL still maintains CA at a high +40%.

Provisions have come off significantly to PKR1.2bn, down c. 70% both QoQ and YoY. NPLs have remained flat and asset quality is resilient.

BAFL has reported record non-markup income at PKR10.3bn (up a massive 2.3xYoY and c. 70%QoQ). Fee Income is up a massive 49%YoY to PKR4.5bn – an impressive feat likely driven by its card business and improving market share in trade (8.8% market share). Fx income remains above the PKR2.5bn/quarter mark. BAFL also reported a large capital gain of PKR2.1bn vs. a loss in the previous quarter.

Core admin expenses are up 26%YoY at PKR18.4bn. Together with strong core revenues, the cost-to-income ratio has inched lower to 42% vs. a high of 54% SPLY.

BAFL has reported an effective tax rate of 66% – much higher than our estimated 49%. We understand BAFL has prudently booked a tax provision on windfall profits made in Fx income for CY21-22. Banks have obtained a stay order in this regard and could potentially lead to a tax reversal down the road.

Despite the miss, we are impressed with today’s result. BAFL’s core revenues are delivering above expectation while asset quality continues to hold. Costs are also growing at a steady pace with focus on efficiency coming through. BAFL is a top banking play and trades at a CY24f P/B of 0.5x and P/E of 2.2x. We have a TP of PKR65/sh on the name.

Courtesy – Intermarket Securities Limited

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