Research Analyst
Apr 20 - 26, 2009

Bank Alfalah Limited started its operations from November 01, 1997 in Pakistan. The bank's principal activity is to provide commercial banking and related services. The bank accepts deposits in local and foreign currencies, deals in remittances, and extends advances to industrial and agriculture sectors. It operates through 230 branches in Pakistan and 8 overseas branches. Through the international correspondent banking relationships, the bank provides direct and indirect foreign currency remittance facilities around the world.

Currently, PACRA has rated the banks AA, entry rating for long term and A1+ for short term. Furthermore, the bank has been awarded a credit rating of AA-.


Profit before provision & Tax 3,830,717
Provision 2,035,997
Profit before taxation 1,794,720
Taxation 493,419
Profit after taxation 1,301,301
Earning per share Rs. 1.63
Capital adequacy 8.03%
Income/expense ratio 3.42 times
ROE 9.17%
ROA 0.38%
Advances / deposits ratio 64.07%
Cash dividends 15%
Source: Bank Alfalah

During the year, the bank's profit before taxation stood at Rs1,794.720 million as compared to Rs4,535.552 mn in the previous year. The bank's profit before taxation and impairment from core operations in the current year is 17.7% higher than the corresponding year after adjusting for one time capital gain of warid telecom sales and impairment on equity securities. The profit arising from availing the FSV benefit-net of tax end-which is not available for either cash or stock dividend to shareholders amounted to Rs404.459 million approximately. As at Dec 31, 2008, deficit arising on revaluation of equity investments classified as available for sale amounting to Rs 1,438.7 million have been charged to the profit and loss account as impairment loss in accordance with the requirements of international accounting standards.


With Alfalah Musharaka homes, customers can participate with Bank Alfalah-Islamic Banking Division (BAL-IBD) in joint ownership of property where BAL-IBD invests a certain amount, usually up to 80% of the property value. Through monthly payments a composite of rent for use of property and purchase of BAL-IBDs' Musharaka shares/units in the property to BAL-IBD customers will be able to increase stake in the property every month. The rental component will be readjusted every month to reflect customer's growing share of ownership in the property.

1 14.01 13.84 3,332,500
2 13.84 14.24 7,122,900
3 14.24 15.1 9,379,700
6 15.1 15.8 9,882,300
7 15.8 16.36 8,175,900
8 16.36 15.36 6,075,900
9 15.36 15.45 6,876,300
10 13.73 14.73 10,798,500
13 14.73 14.87 11,835,900
14 14.87 13.91 9,707,200
15 13.91 13.11 14,828,700
Various sources


Banking sector's performance in the first quarter of 2009 saw the advances declined by 3% to Rs3.06 trillion. In the same period last year there had been a 6% growth, which was driven by demand from public sector enterprises. As a result of the decline in advances, gross advance to deposits ratio declined to 79% while net advances to deposits ratio stood at 73%. Due to foreseeable sluggish advances growth, banks' investments increased by 17% in 1Q2009. Investments stood at Rs1.148 trillion in March 2009. Investments to deposits ratio (IDR) of banks reached 30% at the end of the quarter from 26% on Dec 28, 2008.

Deposits witnessed a growth of 2% during 1Q2009, in line with the growth observed in 1Q2008. During the quarter under review, provisions against NPLs increased by 10%. Total customer deposits of the banking industry reached Rs3.9 trillion ($48.1bn) as of Mar 28, 2009, depicting a growth of 2% from Rs 3.8 trillion ($48.2 bn) at the end of Dec 2008. This growth is considerably lower than 5 years' (2004-08) first quarter average annual growth of 3.5%.

The gross advances of scheduled banks fell by 3% to Rs 3.1 trillion ($38 bn) as of Mar 28, 2008. After witnessing a fall of 19% or Rs 230 bn in 2008, banks' investment portfolio returned to normal levels as investments rose by 17% to Rs 1.1 trillion ($14.2bn) as of Mar 28, 2008. Lower deposit growth and strong credit offtake from the public sector had resulted in banks offloading investments to facilitate lending in 2008. However, the decline in private credit off take during 2009, thus far, has resulted in the growth in investment portfolio.


The banking sector continues to remain under distress owing to economic slowdown and increasing asset quality concerns. All have forced banks to book heavy provisions for NPLs as well as impairment loss on equity investments. Lower levels of economic activity will result in advances slowdown to 6% in 2009.

During the past five years, Bank Alfalah has emerged as one of the financial institutions in the region that are endeavoring to meet the needs of today and tomorrow. The bank has shown robust growth during last calendar year. However, the bank is facing stiff competition within the growing banking industry of Pakistan.