Allied Bank Limited (ABL) FY09 Review

ABL outperformed the overall banking sector


Allied Bank Limited (ABL) has recently disclosed its detailed accounts for the period of FY09. The bank posted the NPAT of PKR 7.1 Billion during the period comparing to PKR 4.1 Billion during the same period last year which translated 73%YoY growth during the reviewing the period while EPS stood at PKR 9.1 during the comparing to PKR 5.2 during the corresponding period last year. Moreover, the bank announced the final cash dividend of PKR 2.00 per share coupled with 10% bonus shares.

NII surged by 41%YoY

The Net Interest Income of the bank surged by 41%YoY to PKR 18.7 Billion comparing to PKR 13.3 Billion during the same period last year. The massive expansion comparing to the peers was in response of 190bps jump in earnings yield to 13.4% during the period as the bank lend its money by adopting the valuable strategy where peers remained risk averse and preferred to invest the excess liquidity in government instruments. On the other hand, the NIMs of the bank rose by 85bpsYoY to 6.1% comparing to an average NIMs expansion of 33bpsYoY for peers.

Non-interest income upped by 20%YoY

The Non interest income of the bank witnessed 20%YoY increase to PKR 6.0 Billion from PKR 5.0 Billion in last year mainly at the back of increase in gains from the sales of securities to PKR 1.1 Billion. Moreover, the dividend income of the bank took a slight dip where income from foreign currency account rose by 231%YoY.

NPLs improved to 6.5%

The NPLs of the bank increased by 18%YoY to PKR 16.3 Billion which allowed the NPL ratio to stand at 6.5% coupled with the coverage ratio which was at 77% during the period. The bank made the total provisions of PKR 4.5 Billion during the period comparing to PKR 3.2 Billion last year which depicted a massive surge of 41%YoY during the reviewing period. As a proportion of total loan book, exposure to textile declined by 200bpsYoY to 18%, share of sugar was down 63bpsYoY to 1.33% and retail exposure remained flat at 2.5%

Looking Forward

ABL owns enough competence to retain strong bottom-line growth going forward. The bank is targeting to raise its exposure to high yielding SME segment. Moreover, the non-interest income of the bank is expected to remain growing mainly at the back of higher capital gains on its equity portfolio where the bank currently has PKR 2 Billion as un-realized gains. I currently maintain ‘hold’ stance on the ABL’s scrip by considering its FY10E earnings at 6.68x where my target price for FY10 is PKR 69.50 per share.