Bank Alfalah to face Rs1.2b impairment charge

Bank Alfalah is expected to face an impairment charge of Rs1.2b as there is no development in the sale of Warid shares.

Bank Alfalah is expected to face an impairment charge of Rs1.2 billion as there is no development in the sale of Warid Telecom shares, according to an analyst.

Bank Alfalah currently holds 319 million shares or 8.76 per cent of Warid Telecom which is currently recorded at Rs4.4 billion, culminating in a book value per share of Rs13.8.

Warid shares have dipped to Rs9.9 per share in March or a total of Rs3.2 billion for Bank Alfalah’s holding, causing a loss of Rs1.2 billion.

This is unless Bank Alfalah manages to get an extension beyond the June 30, 2010 deadline which had been granted by the regulator, said JS Global Capital analyst Mustafa Bilwani.

“Second quarter earnings are likely to remain under pressure on account of a muted advances growth, rising administrative expenses and continuing provisioning expenses on account of category shifting in non-performing loans,” said Bilwani.

Bank Alfalah’s net profit stood at Rs586 million in the first quarter of 2010.

“The impairment charge has been the reason for its underperformance at the bourse off late, with the scrip losing 31 per cent this year,” said Bilwani in his research report.

This loss has already been adjusted for in the first quarter balance sheet, with the book value of equity per share (BVPS) standing at Rs16.8. The loss will result in after-tax earnings per share impact of Rs0.58.

Bank Alfalah also holds 83.5 million shares, diluted stake of 13.5 per cent, in the recently listed Wateen Telecom.

The investment is recorded at a cost of Rs5 per share on the books of Bank Alfalah and with Wateen’s current share price at Rs6.5, there is no imminent risk of an impairment charge, said Bilwani.