Bank Alfalah Limited (BAFL) announced its 1QCY23 results today reporting above expected earnings of PKR 10.7Bn (EPS: PKR6.8), ↑114/161% YoY/QoQ respectively. The bank did not announce an interim dividend. Key highlights of the result are summarized below:

Net Interest Income (NII) increased by a massive 96% YoY to PKR 27.9Bn in 1QCY23 aided by NIMs accretion, robust CA ratio and hefty balance sheet growth. The bank’s well profiled investments book with greater exposure in short term paper and floating rate bonds has enabled the sizable top-line growth. Going forward, we expect the top-line accretion to continue through the rest of CY23 as the asset books re-price.

Non-funded income of the bank of the bank surged to PKR 6.6Bn in 1QCY23, having undergone a sizable 50/51% YoY/QoQ accretion. The significant increase was aided by 34% YoY growth in fee income and 132% YoY growth in forex income however, capital losses of PKR 416Mn limited the overall increase. Fee income growth can be linked to the bank’s improved market share in the remittance business alongside firmer foothold in the trade business. Higher card related fee and improved commission income also facilitated the increase. On the other hand, massive increase in forex income can be attributed to PKR volatility and greater transactional flow.

Operating expenses of the bank increased by a sizable 44% YoY to PKR 15.0Bn on the back of the management’s ongoing investment in the brick and mortar model, higher remuneration charges, IT related expenditure and inflation.

The bank booked a provision charge of only PKR 522Mn in the QEMar23. Effective tax rate for the quarter clocked-in at 43.4%, still relatively higher than the 39% applicable rate for CY23 however, it slowed down from ~50% booked in the previous quarter.

Courtesy – BMA Capital Management Ltd.