AKD Securities Limited – Off the Analyst’s Desk

Karachi, March 08, 2019 (PPI-OT): BAFL: Conference Call takeaways

Bank Alfalah Limited (BAFL) hosted a conference call on its CY18 results today. To recall, the bank recorded an NPAT of PkR10.6bn (EPS: PkR5.98) in CY18 vs. PkR8.3bn (EPS: 4.72) in CY17.

The Central Bank of Afghanistan had declined the application of Azizi Bank for the acquisition of BAFL’s Afghanistan operations. The management updated that the operations are back to BAU (Business as usual) mode.

The bank recorded a provisioning expense of ~PkR1bn against a specific customer from the power sector, which the management stated to be of subjective nature. Additionally, the management stated that the recovery line is still present to counter any provisioning charge due to depletion in asset quality in CY19.

The management expects single digit advances growth in CY19 after recording 25% jump in advances in CY18. Considering the current economic environment the bank plans to cautiously move further in SME and low cost housing financing.

CASA dropped to 75.4% in CY18 vs. 76.9% in CY17 where in the light of current interest rate environment, the bank opted for higher cost deposits to capitalize on available market opportunities.

Islamic book witnessed a growth of 54% during CY18.

The Bank would record prior year super-tax charge in the results for 1QCY19 however, WWF provision reversal is dependent on legal opinion.

Administrative costs remained flat at PkR25bn in CY18. The management expects administrative costs to pick-up due to bank’s branch expansion initiative in CY19.

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