Karachi: Bank Al Falah Limited (BAFL) conducted a corporate briefing session to discuss its recent financial performance and future outlook. The bank reported a profit after tax of Rs 30.6 billion for the first nine months of 2026, marking a 43% year-over-year increase, with earnings per share (EPS) of Rs 9.71. For the third quarter of 2026, the bank posted a standalone profit after tax of Rs 9.3 billion, with an EPS of Rs 2.94, and declared a dividend of Rs 1.50 per share.
According to JS Global, the bank's net interest income grew by 6% year-over-year despite lower interest rates, while non-interest income increased by 31%, driven by capital gains and foreign exchange income. The bank anticipates stable net interest income in the fourth quarter of 2026, with potential improvements next year. Operating expenses are expected to rise due to inflation and the impact of hiring, though management aims to maintain a cost-to-income ratio within the 60-65% range.
Management projects total deposits to grow by 15-18%, with current deposits rising by 18-20%, while maintaining the current account mix within the historical 40-45% range. The bank's strategic focus remains on average deposit growth rather than aggressive branch expansion. The cost of deposits stood at 5.4% in the third quarter. Additionally, the bank reduced savings rates on certain non-MDR-protected deposits by approximately 50 basis points, aligning with market trends, and maintained a 6.1% market share in deposits.
BAFL reported gross advances of Rs 1.2 trillion, representing a 7.5% market share and an advances-to-deposits ratio of 46%, solidifying its position as a leading player in consumer financing. Net investments increased by 6% year-over-year to Rs 1.6 trillion, primarily due to reduced arbitrage positions. The bank's portfolio includes fixed-rate Pakistan Investment Bonds (PIBs) accounting for 30-32% of investments, with floating-rate PIBs representing 20-25%. Over 50% of the floating PIBs were reset in October, with the remainder expected to be reset in the coming months.
The bank continues to optimize returns through active portfolio management, with investment gains and open market operations borrowings dependent on interest rate movements and positive carry opportunities. Despite strong recoveries during the third quarter, management remains cautious about potential reversals in the coming quarters. The bank expects monetary conditions to remain tight due to elevated inflation and geopolitical uncertainty, particularly if oil prices linger around US$90-110 per barrel, though no immediate rate hikes are anticipated.
Foreign trade volumes reached US$6.64 billion during the nine-month period, translating to a market share of 9.4%. BAFL processed US$3.8 billion in remittances, capturing an 11.6% market share, though management remains cautious about expanding its remittance market share following changes to the rebate scheme. The bank's digital throughput reached Rs 18.21 trillion during the same period, with a digital migration ratio of 93% as of September 2026.
A strong Capital Adequacy Ratio (CAR) of 14.8, well above regulatory requirements, provides a buffer for growth. The higher Risk-Weighted Assets (RWA) reflect changes in asset mix and regulatory requirements, particularly increased capital charges on foreign exchange exposures and the application of trading book charges on available-for-sale securities.