What does Allied Bank’s 2QCY24 performance reveal?

Allied Bank Limited (ABL) recently released its financial results for the second quarter of 2024, showing promising improvements across several key financial indicators.

With a YoY profit increase of 25%, ABL has demonstrated resilience and effective management in a challenging economic environment.

But what were the main drivers behind this growth and how do these results compare to the previous year?

Key financial indicators

In 2QCY24, ABL reported a Profit After Tax (PAT) of PKR 12,471 million, a significant increase from PKR 9,952 million in 2QCY23, marking a 25% YoY growth.

This impressive rise in profits also led to an improved EPS of PKR 10.9, up from PKR 8.7 in the same quarter last year.

The bank’s robust earnings performance is largely attributed to controlled costs and improved income from non-markup sources.

Net Interest Income (NII)

Despite a flattish trend in Net Interest Income (NII), which saw a slight decline of 3% YoY to PKR 29,373 million, ABL managed to maintain its profitability.

The NII’s performance was likely constrained by increased interest expenses, which grew by 6% YoY due to higher repo-borrowing costs and rising yields on the asset side.

However, the bank’s overall income was supported by a strong 54% YoY increase in Non-Markup Income (NMI), which rose to PKR 7,642 million, driven by gains in foreign exchange income and capital gains.

Managing costs and risks

Operating expenses surged by 19% YoY, reaching PKR 15,279 million.

This rise, coupled with an increase in the cost-to-income ratio to 41%, reflects the challenges posed by inflationary pressures and regulatory costs.

However, ABL’s cost management strategies have kept these increases within a manageable range, allowing the bank to sustain its profitability.

One of the standout points in ABL’s 2QCY24 results was the substantial net reversal of credit loss allowances, amounting to PKR 2,885 million.

This reversal marks a significant improvement from the losses recorded in the previous year, indicating effective risk management and recovery efforts.

The effective tax rate for the quarter was 49%, suggesting no additional charges for ADR tax, which also contributed positively to the bottom line.

Indicator	2QCY24	2QCY23
Net Interest Income (NII)	PKR 29,373 mn	PKR 30,210 mn
Non-Markup Income (NMI)	PKR 7,642 mn	PKR 4,970 mn
Operating Expenses	PKR 15,279 mn	PKR 12,811 mn
Profit After Tax (PAT)	PKR 12,471 mn	PKR 9,952 mn
Earnings Per Share (EPS)	PK10.9	PKR 8.7
Dividend Per Share (DPS)	PKR 4.0	PKR 2.5

Overall, ABL’s performance in 2QCY24 highlights its ability to navigate a challenging financial landscape effectively.

With strong profit growth and improved income streams, the bank remains well-positioned to continue delivering value to its shareholders.

Source: Taurus Securities Limited