Allied Bank Limited (ABL) has announced its annual results for CY16 and has reported a Net Profit after Tax (NPAT) of Rs 14.7 billion, with Earnings per share (EPS) of Rs 12.84. This result is a reduction of 4pc on the last year’s results of NPAT Rs 15.57 billion. According to the Intermarket Intel report, this result falls below the market expectations and is a result of “lower-than-expected capital gains and high administrative expenses.” However, the dividend announced by the bank of Rs 1.75 per share lies in line with the expectations. It brings the CY16 payout ratio to Rs 7.25 per share with a payout ratio of 56pc.
Other important highlights of the result announcement include an 8pc year-on-year reduction in Net Income, despite the 15pc year-on-year increase in non-interest income that amounted to Rs 11.87 billion for the year 2016. The loan provision reversals were reported at Rs 335 million and the non-interest expenses were reported with 11pc increase on a year-over-year basis. According to the report, these expenses can be traced back to the addition of 75 branches of the bank as of September 2016.
In terms of the quarterly results, the bank reported NPAT of Rs 2.33 billion which was 29pc lower than the results of the same quarter in the previous year. This came as a result of the 22pc fall in Net Income and 18pc increase in administrative expenses, as explained earlier. Sequentially, earnings fell by 37pc from the third quarter of 2016, with pre-provision of NII registering at 11pc reduction on a year-over-year basis. The decline in NII for the last quarter of 2016 came primarily from the reinvestment of high yield Pakistan Investment Bonds (PIBs) at lower rates and the loan provision reversal of Rs 44 million. The non-interest income increased, which can be attributed to the 21pc rise in Free Income and normalization of dividend stream.
Analyst Umair Naseer is of the opinion that the new branches called for more administrative expenses but they still rose more than they were expected to increase. He said that there might be a one-off expense that has led to high costs leading to lower profits and earnings. With regards to the stock price, he said that the investors will show some negative sentiment but it is not likely to affect the stock price or its trading by a large degree. The Intermarket Intel report said, “ABL trades at a CY17F P/B of 1.2x and P/E of 7.9x. Our TP is PkR 135/sh where we will look to revisit our estimates after management’s conference call (scheduled on 13th Feb’17).”
This is a sound earning scenario.Banks in fallng credit markets and stubborn funds prices have to survive with tricks and turns for non fund business that is waning out due to intense competition and shrinkage of the market. Dar is pursuing an emptying economy policy that is sadly supported by owners of both MCB and ABl.