BAFL Grows Deposits But Profitability Weakens Under Rising Cost Base.

Posted by: Aamir Hayat Like: 0 Post Date: April 22, 2026

BAFL Grows Deposits But Profitability Weakens Under Rising Cost Base.

Ticker: Bank Alfalah Limited BAFL
Analyst Briefing Date: March 31, 2026

This article summarizes BAFL Bank Alfalah Limited’s corporate briefing, focusing on CY25 earnings decline, strong deposit growth, investment portfolio composition, rising cost structure, and forward outlook on efficiency, funding mix, and interest rate sensitivity. It reflects a bank expanding its balance sheet while facing pressure on profitability.

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What did the management say?

Management stated that the deposit growth of 17% achieved in CY25 is expected to continue into the next year, supported by ongoing mobilization efforts. A key focus remains on increasing low-cost current account deposits, which also grew 17%, to improve margins and strengthen the funding base. The bank is prioritizing retail expansion and remittance-related flows to support deposit accumulation. They also highlighted that the investment strategy is deliberately structured with lower exposure to fixed-rate instruments at 27%, aimed at improving resilience in a changing interest rate environment. Management noted that a normalized cost-to-income ratio for a retail bank of this scale should ideally range between 50% and 60%. International exposure remains concentrated in investment-grade bonds in the Middle East with stable valuations.

What did the numbers say?

Bank Alfalah reported EPS of PKR 17.63 for CY25, down 30% from PKR 25.27 in CY24, despite total income increasing 6% to PKR 183.3 billion. Net mark-up income rose 7% to PKR 135.9 billion, supporting revenue stability. However, profit after tax declined 30% to PKR 27.8 billion, indicating pressure on bottom-line conversion. Deposits increased 17% to PKR 2.5 trillion, while total investments rose 9% to PKR 2.18 trillion. The investment portfolio remained diversified across fixed-rate instruments (27%), T-bills (33%), and floating-rate instruments (40%). Cost-to-income ratio rose sharply to 63% from 49%, driven by branch expansion and marketing spending, while capital adequacy ratio stood at 15.9%. Dividend payout increased 24% to PKR 10.50 per share.

What should investors expect going forward?

Investors should expect continued deposit growth momentum, supported by retail expansion and ongoing efforts to improve current account penetration. This should help stabilize funding costs over time, but earnings will still depend on the bank’s ability to improve efficiency. The current investment mix provides partial flexibility in a shifting interest rate environment. Near-term profitability may remain under pressure due to elevated cost-to-income levels, but management expects normalization toward the 50–60% range over time. Future performance will be driven by execution on low-cost deposit growth, cost control in expansion phases, and stability in interest rate conditions.

What are analysts saying about BAFL stock?

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According to the KSEStocks Database, bafl is covered by 13 analysts in Pakistan and they have an average price rating of PKR 135. This average price target suggests an upside of 109.3% from the last close of PKR 64.69. According to EPS estimates from 17 different brokers, BAFL has an average 2026 EPS expectation of 19.7. This suggests the stock is now trading at a forward PE of 3.3.

Why do we compile research firms’ forecasts? Broker research is fragmented across different houses. Compiling it in one place helps investors see consensus, identify divergence, and think independently rather than relying on a single view.

⚠️ This post reflects the author’s personal opinion and is for informational purposes only. It does not constitute financial advice. Investing involves risk and should be done independently. Read full disclaimer →