The net profit fell 2.8 per cent to Rs1.08 billion against Rs1.11 billion posted in the same period last year, said a notice sent to the stock exchange.
The consensus of two research firms revealed that they expected the bank to post an increase in net profit by 3.6 per cent to Rs1.15 billion.
Earnings took a hit from non-interest income falling 18 per cent as the bank booked lower income from dealing in foreign currency among others, according to JS Global Capital Mustafa Bilwani.
Administrative expenses also dampened earnings as they surged by 17 per cent to 5.95 billion on account of increased inflationary pressures, Bilwani reported in the company report.
Net interest income surged by 21 per cent to Rs6.3 billion year-on-year on the back of an increase in earning assets, particularly investments and a lower cost of funds.
Low provision this time round; but concerns remain
Bank Alfalah faced a sharp surge in infected loans in recent period as non-performing loans (NPLs) to loan ratio increased from only 2.7 per cent in 2007 to over 8 per cent during the start of 2010.
However, Provision of NPLs declined by 35.4 per cent during the first half of the year.
As the pace of NPLs accumulation decelerates, it yields dividends in terms of lower provision compared to the corresponding period, informed BMA Capital analyst Abdul Shakur.
Notwithstanding that, Bank Alfalah still carries better asset quality among its peers. NPL to loan stands at 8.3 per cent compared with over 13 per cent for the industry. However, due to the persistent inflationary pressures in short to mid term, higher interest rate environment and relatively higher exposure to consumer segment would remain the major concern in near term, said Shakur.
Published in The Express Tribune, August 28th, 2010.
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