Karachi, August 17, 2021 (PPI-OT): ABL: 1HCY21 Result Review – (Above expectation)

Allied Bank Limited (ABL) announced its 1HCY21 result today where the bank’s consolidated earnings clocked in at PkR89bn (EPS: PkR7.75). The result was above our expectations on account of higher than anticipated capital gains realized and lowers than anticipated effective tax rate.

Along with the result, the bank announced a payout of PkR2.0/sh, this took the cumulative payout during 1HCY21 to PkR4.0/sh.

The bank’s Funded Income receded by 9%YoY amid declining NIMs. The book growth has kept the interest earned at similar levels seen during 1HCY20; however, on the back of falling yields on earning assets, the margins got squeezed.

ABL also recorded provision reversals of PkR170mn during 2QCY21 which took the cumulative provision reversals during the year to ~PkR310mn

The Non-Funded Income reported an uptick of 19.5%YoY during 1HCY21 on the back of higher i) fee income (up 16%YoY), ii) securities trading income (up 17%YoY) and iii) dividend income (up 50%YoY) which supported the earnings growth.

The admin expenses grew by 10%YoY to PkR16.8bn, in line with the pick in yearly inflation. This consequently brought the cost to admin ratio to 53% (vs 51% during SPLY).

The effective tax rate was reported ~40% which indicates that the bank may not have pre-emptively booked additional tax liability resulting from lower ADR. This may result in higher tax liability for the bank in the coming quarters.

The scrip trades at a forward P/B multiple of 0.6x. We have a BUY call on the scrip with a total return of 65% on offer from the last close.