Bank Alfalah’s Latest Performance: Key Takeaways for Investors( by AKD)

Bank Alfalah (BAFL) has announced its financial results for the last quarter of 2024. Let’s break down what these numbers mean in simple terms.

🔹 Profitability: A Tough Quarter

The bank earned PKR 4.7 billion in profit, which translates to an earnings per share (EPS) of PKR 3.0. However, this is 49% lower than the same period last year and 64% lower than the previous quarter.

Why did profits drop?

• The bank made less money from investments and lending due to lower interest rates in the market.
• Operating costs increased significantly due to rising expenses.
• Higher tax payments further reduced the profit.

🔹 Dividend: A Positive Surprise

Despite lower profits, Bank Alfalah rewarded shareholders with a PKR 2.5 per share dividend, bringing the full-year dividend to PKR 8.5 per share. This means the bank returned 84% of its profit to investors as cash.

🔹 Interest Income: Lower Than Before

The bank earns money primarily by charging interest on loans. This quarter:

• The bank earned PKR 119.8 billion in interest, which is 5% lower than last year and 9% lower than the previous quarter.
• However, the amount spent on interest payments also dropped by 3% year-on-year and 10% from the last quarter, balancing the impact.

The bank’s Net Interest Margin (NIM)—a key measure of how much profit a bank makes from lending—fell to 4.5% (compared to 5.4% last year and 4.8% in the previous quarter). This means the bank made less profit on its loans and investments.

🔹 Other Sources of Income: A Bright Spot

The bank also earns money from fees, commissions, and foreign exchange transactions. This Non-Interest Income increased by 23% year-on-year, reaching PKR 11.7 billion.

However, compared to the last quarter, this income fell by 9%, mainly because the bank made lower gains from selling investments.

🔹 Expenses and Taxes: A Heavy Burden

• Expenses increased by 41% from last year and 29% from the last quarter. This was mainly due to higher salaries and costs of running more branches.
• Taxes were much higher at 67% of pre-tax profit, compared to 63.8% last year. This was due to new government tax policies that increased the tax rate for banks.

🔹 Future Outlook: What’s Next for Investors?

• The Pakistani government has announced further tax increases for banks in the coming years, which could impact future profits.
• However, the removal of certain tax penalties on bank deposits could provide some relief.
• The bank’s strong dividend payout is a positive sign for investors, despite lower profits.

📌 Final Thoughts

✅ Profit fell due to lower interest income and higher expenses.
✅ Dividend payout was strong, rewarding investors.
✅ Income from fees and foreign exchange transactions increased.
✅ High taxes and operational costs remain challenges.

Despite the decline in earnings, Bank Alfalah continues to be a stable institution with a commitment to rewarding its shareholders. Investors should watch for future interest rate changes and government policies, as these will play a big role in the bank’s profitability.