Corporate results: ABL hit hard by State Bank policy rate cuts

Manages to post 16% higher profits on lower provisions, higher non-core income.


Zain Siddiqui February 14, 2013
ABL’s profit declined 23% in the last quarter of 2012.

KARACHI:


Allied Bank (ABL) has announced its result for calendar year 2012 (CY12) on Thursday. On a consolidated basis, ABL has posted a net profit of Rs11.88 billion for CY12, up 16% year-on-year (YoY). It has also announced a final cash dividend of Rs2 per share alongside the result, bringing the full-year payout to Rs6.5 per share. It has also announced a 10% bonus shares issue.


The bank has been hit particularly hard by the State Bank’s repeated cuts in the benchmark interest rates, with its net interest income declining by a sharp 27% YoY (interest expenses grew a whopping 168%). However, a 78% YoY decline in provisioning expenses saved its skin, along with a near 100% increase in non-interest income accruing from higher dividends and capital gains. The latter factor also resulted in a significantly lower effective tax rate. The bank also witnessed a 12% YoY rise in non-interest expenses, with core administrative expenses spiking towards the year end. As characteristic of banking activity, the bank realised lower gains from dealing in foreign currencies as compared to the previous year.

On a quarterly basis, ABL’s profit declined 23% in the last quarter of 2012 over the preceding quarter, primarily due to lower interest and dividend incomes and the aforementioned spike in administrative expenses.

Bank Al Habib’s profits grow 20% in 2012

Bank Al Habib announced its earnings results on Thursday, declaring a net profit growth of 20% in CY12 over the previous year to reach Rs5.45 billion. It has also announced a final cash dividend of Rs3 per share.

The bank’s net interest income increased 22.3% during the year, despite the State Bank’s repeated policy rate cuts, to reach Rs14.90 billion. Meanwhile, its provisioning expenses declined by 74% to Rs466 million on better payback capacity of borrowers in a low rate environment.

A result preview released by Elixir Securities says the bank’s strong preference for government securities and its active participation in the central bank’s open market operations have expanded Bank Al Habib’s average earning assets and offset the contraction in the net interest margin. It also mentions that the bank’s deposits have increased in the ballpark of 15% YoY. “Advances growth would likely be robust [...] based on working capital loans disbursed during the year,” the note adds.

Under its non-interest income head, its revenues from fees commission and brokerage income increased by 15% to reach Rs1.50 billion, while dividend income rose 41% to reach Rs328.21 million. Similarly, it earned Rs77 million from the sale of securities this year, as compared to a loss of Rs1.26 million under this head a year ago. However, its income from dealing in foreign currencies declined 22% to Rs577.89 million.



Published in The Express Tribune, February 15th, 2013.

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