BANK ALFALAH LIMITED

S.M. ABBAS ZAIDI,
Research Analyst
, PAGE
Sep 15 - 21, 2008

Bank Alfalah Group's principal activity is to provide commercial banking and related services. The Group accepts deposits in local currency, client deposit in foreign currency, remittances and advances to business, trade, industry and agriculture. The Bank is currently operating through 231 branches that include 32 Islamic banking branches and 7 foreign branches in Bangladesh and Afghanistan and one wholesale banking unit in Bahrain. The bank is the fifth largest bank of Pakistan in terms of assets that are 6% of the total banking sector Assets. The Bank has invested in revolutionary technology to have an extensive range of products and services. PACRA, a premier rating agency of the country, has rated the bank 'AA', Entity Rating for long term and A1+ for the short term. These ratings denote a very low expectation of credit risk, strong capacity for timely payment of financial commitments in the long term and by highest capacity for timely repayment in the short term respectively. Further the unsecured subordinated debt (term finance certificates) ratings of first, second and third unsecured listed and subordinated TFC issues of PKR 650 million, PKR 1,250 million and Rs.1, 325 million have been maintained at AA-.

FIVE YEARS PERFORMANCE

INDICATORS

2003

2004

2005

2006

2007

OPERATIONAL RESULTS

Total Income

7,425

7,140

14,515

24,416

31,822

Operating expenses

1,803

2,679

4,344

5,918

8,289

Profit before Income Tax

3,506

1,654

2,563

2,566

4,536

Profit after Taxation

2,123

1,092

1,702

1,763

3,130

BALANCE SHEET

Shareholders' Equity

3,753

4,369

6,738

10,573

13,767

Total Assets

98,952

154,835

248,314

275,686

328,895

Advances

49,216

88,931

118,864

149,999

171,199

Investments

28,904

35,503

57,416

56,502

88,492

Deposits and other accounts

76,698

129,715

222,345

239,509

273,174

RATIOS

Capital Adequacy

8.45

8.16

8.66

9.48

9.85*

Income / Expense ratio

4.12

2.67

3.34

4.13

3.84

Return on Average Equity (ROE)

79.08

26.89

30.65

20.37

25.72

Return on Average Assets (ROA)

2.59

0.86

0.84

0.67

1.04

Advances / Deposits Ratio

64.17

68.56

53.46

62.63

62.67

Cash Dividends

25.00

-

12.00

-

-

Stock Dividend

100.00

25.00

-

33.33

30.00

Basic Earnings per share

8.49

3.90

3.92

2.91

4.82

No. of Employees (other than outsourced)

2,133.00

3,352.00

5,218.00

6,543.00

7,371.00

Source: Bank Alfalah

FINANCIAL PERFORMANCE:

THE FINANCIAL STATEMENTS OF THE BANK FOR THE THREE MONTHS ENDED MARCH 31, 2008.

 

THREE MONTHS ENDED

THREE MONTHS ENDED

INDICATORS

31-Mar-08

31-Mar-07

 

RUPEES IN '000)

Profit before provisions and Taxation

1,627,350

1,190,302

Provisions

(134,366)

(223,208)

Profit before Taxation

1,492,984

967,094

Taxation

(495,266)

(305,560)

Profit After Taxation

997,718

661,534

Earnings per share

1.25

0.83

Source: Bank Alfalah

During the first three months, profit before provision and taxation stood at 1,627,350 million as compared to Rs 1, 190,302 million for the previous comparable period, registering and increase of 36.71%. The profit after tax (PAT) shows an increase of 51% to Rs 997, 718 million from Rs 661, 534 million. EPS also increased from 0.83 in 1Q 07 to 1.25 in 1Q08 showing an increase of 51%.

ALFALAH ISLAMIC BANKING

Bank Alfalah's Islamic Banking Division (BAL-IBD) started operations in 2003 and at its year end reflected a modest capital base of Rs 100 million and deposits totaling Rs 113.7 million. By following year end, BAL-IBD's equity had risen more than 4 times to Rs 569 million and the balance sheet footing had swelled to Rs 7,799 million. Deposit size had grown from less than Rs 114 million to over Rs 7,229 million. The pace of frenetic, triple digit growth was continued over the next twelve months as equity more than doubled to Rs 1,278 million from Rs 569 million. Assets also recorded a more than 100% growth, climbing to Rs 15,634 million from Rs 7,799 million. Deposits alone failed to double rising to Rs 12,476 million from Rs 6,548 million and managing a healthy 90% increase.

AUTHORIZED CAPITAL

With the announcement by the SBP of latest increase in Minimum Capital Requirement of Rs 6 billion by the end of Dec 2009, the bank Alfalah is looking to increase its authorized capital to Rs 15 billion from the present figure of Rs 8 billion which is divided into 80 million ordinary shares and the paid up capital is Rs 6.5 billion. This increase in authorized capital will also enable the bank to meet SBP's future requirement of capital adequacy.

CONCLUSION

During the past five years, bank Alfalah has emerged as one of the foremost financial institution in the region endeavoring to meet the needs of tomorrow and today. Currently, the bank's Minimum Capital Requirement (MCR) is much more than the requirement announced by SBP. The Bank has shown robust growth during HY08. However, the bank faces stiff competition with the growing banking industry as the bank will have to improve its Minimum Capital Requirement in order to meet the requirements of the central bank.