Karachi, July 29, 2022 (PPI-OT): BAFL: Higher NFI Lead to earning surprise

Bank Al-Falah Limited (BAFL) announced its 1HCY22 result today, where it posted consolidated earning of PkR8.8bn (EPS: PkR4.9), up 25%YoY. Along with the result the bank also announced a payout of PkR2.5/sh. The result was above our and consensus expectations owing to robust performance of the bank’s FX desk.

Here are the key takeaways from the result.

BAFL’s Net Interest Income (NII) grew by ~46%YoY during 1HCY22 on the back of robust book growth and favourable asset pricing.

Non-Funded Income (NFI) was higher than expected and clocked in at PkR11.4bn owing to strong performance of FX trading desk which allowed the bank to beat our expectations on the higher side. Fee and Commission income also posted a growth of ~33%YoY whereas dividend income increased to PkR590mn from PkR273mn from SPLY.

Admin expenses reportedly jumped by 24.9%YoY during the period under review on the back of rising inflation, taking the cost-to-income ratio to ~60% during the period under review.

Provisioning expenses clocked in at PkR3.7bn during 2QCY22, which took the total provisioning expenses during 1HCY22 to PkR4.0bn, the provisioning expenses were slightly higher than expectations and therefore kept the bottom-line growth in check.

Effective tax rate for the quarter clocked in at ~60%, attributable to imposition of super tax and poverty alleviation tax announced in federal budget.

Along with the result, the bank announced a half yearly dividend of PkR2.5/sh. We have a buy call on the scrip with a TP of PkR40/sh. The scrip trades at a forward PER of 0.54x only.