Research Analyst
Nov 16 - 22, 2009

Bank Alfalah Ltd is engaged in commercial banking and related services as defined in the banking companies ordinance, 1962.

As the new identity of HCEB after the privatization in 1997 the management of the bank implemented strategies and policies to carve a distinct position for the bank in the market.

Strengthened with the banking of the Abu Dhabi Group and driven by the strategic goals set out by its board of management, the bank has invested in revolutionary technology to have an extensive range of products and services.

The bank perceives the requirements of their customers and matches them with quality products and service solutions. 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 today.



2 13.53 12.81 9,210,712
3 12.81 12.92 3,216,696
4 12.92 13.18 3,086,518
5 13.18 13.21 5,312,920
6 13.21 12.75 2,892,943
10 12.75 12.7 2,052,053

Bank Alfalah's Islamic banking division (BAL-IBD) started operations in 2003 and at its yearend reflected a modest capital base of Rs100 million and deposits totaling Rs 113.7 million. Since then, BAL-IBD's equity has raised more than 4 times to Rs 569 million and the balance sheet footing swelled to Rs 7,799 million. Deposit size has 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 to Rs 12,476 million from Rs 6,548 million yet managed a healthy 90% increase.

Financial results as of June 30, 2006, reflect growth but at more modest pace. Deposits climbed to Rs 14,111 million, rising Rs 1,635 million in six month's period. Income for the 6-months period was Rs 111.23 million.





SEP 30, 2009

SEP 30, 2008

Profit Before Provision and Taxation 4,068,056 4,635,181
Provision (2,088,976) (919,308)
Profit Before Taxation 1,979,080 3,715,873
Taxation (417,525) (1,264,003)
Profit After Taxation 1,561,555 2,451,870
EPS (Rs) 1.26 2.65

The bank is operating through 283 branches that include 48 Islamic banking branches and 7 foreign branches in Bangladesh and Afghanistan and one offshore banking unit in Bahrain.

During the nine month period ended Sep 2009 the bank's profit before provision and the taxation stood at Rs 4,068,056,000 as compared to Rs 4,635,181,000 for the previous comparable period. Bank Alfalah has maintained the general provisions against the consumer portfolio in compliance with the current prudential regulations on consumer banking.


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. The ratings of first and 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- .


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 their stakes in the property every month. The rental component will be readjusted every month to reflect customer's growing share of ownership in the property.


During the quarter ended June 2009, the banking system continued to show resilience against major risk factors, though the heightened credit risk remained a major source of concern for banks. The growth in non-performing loans (NPLs) pacified and deposit after showing some stagnancy witnessed strong growth of 8.2 %.

Banks posted pre-tax profit of Rs 28.6 billion during the first six months of the year 2009 while risk-based capital adequacy ratio (CAR) for banks improved 13.5 % in April-June, 2009. This improvement in CAR was caused by growth in equity as well as reduction in Risk Weighted Assets as the banks shifted their asset mix from private sector credit to less riskier lending to public sector and government papers.

The asset base of the banking system grew 6.0% over the quarter to reach Rs 6,087 billion. The asset mix, however, witnessed significant change as banks continued to focus on government papers and lending to public sector. A 5.0% growth in advances was mainly contributed by lending to public sector for commodity operations and Public Sector Enterprises (PSEs).

However, due to heightened credit risk as well as private sector's low demand for credit, banks' lending to private sector declined 1.8%. NPLs grew 4.9% over the quarter and infection ratio stayed at 11.5%. However, due to increased loan loss provisions, net infection ratio decreased to 3.7% in June 2009 and provisions covered 70% of the NPLs.


The banking sector continues to remain under distress owing to economic slowdown and increasing asset quality concerns, which has 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 growth slowing down to 6% in 2009.

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. The bank has shown robust growth during this year. However, the bank faces stiff competition with the growing banking industry of Pakistan.