Karachi: Bank Alfalah (BAFL) conducted a Corporate Briefing Session where management discussed its financial performance and strategic outlook. The bank anticipates steady interest rates in the near term, while reporting an increase in borrowings from Rs555 billion in June 2025 to Rs621 billion in September 2025. Management expressed readiness to seize market opportunities as they arise.
The cost-to-income ratio was recorded at 67%, influenced by branch expansions and inflationary pressures, with remittance-related spending being a significant factor. Excluding these marketing expenses, the normalized cost-to-income ratio stands at 56%. The bank expects the remittance situation to stabilize fully by 2026, crucial for the banking industry as it supports trade-related business. Marketing and publicity expenses surged from Rs3.1 billion to Rs13.7 billion, while commission income from remittances declined from Rs2.1 billion to approximately Rs0.4 billion.
Management projects the cost-to-income ratio to hover around 65% by year-end, with expectations to stay within the 60%-65% range in 2026 due to planned branch openings. During the first nine months of 2025, BAFL launched 115 new branches, 38% of which are Islamic. The bank plans to open an additional 35 to 40 branches next year, contingent on market conditions.
The bank's current account mix improved to 43% as of September 2025, reflecting a focus on low-cost deposits. Management predicts this mix to remain between 40% and 42% by year-end, with deposit growth expected to range between 15% and 20% in 2026.
In terms of investments, fixed-rate PIBs make up 40% of total PIBs, yielding approximately 13.5%-14.0%, with durations averaging 2 to 2.5 years. Floating-rate instruments yield 12%-12.5%, with an average spread of about 100 basis points above T-bills. The Capital Adequacy Ratio (CAR) remains robust at 17.9%, exceeding regulatory requirements.
The infection ratio saw a slight decline to 4.0% in the third quarter of 2025 from 4.1% in the previous quarter, while coverage improved to 110.5% from 107.6%. Net advances increased by 25% year-on-year to Rs1,029 billion amid recovering credit demand.
Recently, BAFL announced consolidated earnings of Rs6.3 billion (EPS of Rs4.02), a 21% decline quarter-on-quarter, accompanied by a third interim cash dividend of Rs2.5 per share. Analysts maintain a buy stance on BAFL, with the stock trading at an estimated 2025 PE ratio of 4.9x and a PBV ratio of 0.8x.