Karachi, Bank Alfalah Limited (BAFL) recently held an analyst briefing, revealing substantial growth in its deposit base and detailed plans for the future. The management discussed a series of financial milestones and strategic initiatives aimed at sustaining growth and addressing emerging challenges in the banking sector.
According to AKD Securities Limited, Bank Alfalah's deposit base experienced a remarkable 40% year-on-year increase during CY23, surpassing the PkR2.0 trillion mark. This growth is attributed to the bank's aggressive expansion, including the addition of 130 new branches within the year. Looking ahead to CY24, management expects deposit growth to stabilize, projecting an increase of 15%-20%.
The briefing highlighted an 85% year-on-year surge in borrowings, primarily through treasury repo borrowings, which reached PkR666 billion in CY23. These funds were predominantly allocated to investments, particularly in government securities, to leverage favorable interest spreads. Additionally, the bank noted a 24% reduction in provisions, reflecting fewer non-recurring charges compared to the previous year.
Management also addressed challenges in attracting low-cost deposits, citing competitive pressures for higher yields. Concerns were raised regarding non-performing loans (NPLs) in certain sectors, with management expressing confidence in managing these through proactive restructuring and provisioning.
The bank's investment strategy was outlined, with a diversified portfolio including fixed Pakistan Investment Bonds (PIBs), Treasury Bills, and floating PIBs. An anticipated policy rate cut of 100 basis points in the upcoming Monetary Policy Committee meeting is expected to influence the bank's interest margins and profitability, which management believes will normalize with volume-driven growth.
Bank Alfalah plans further expansion, aiming to open 100-150 new branches in CY24, predominantly focusing on Islamic banking. Future dividend policies will consider capital adequacy and capital expenditure needs, with potential adjustments to quarterly payouts.
Lastly, the bank's investment in its brokerage subsidiary was discussed, addressing a PkR1.2 billion injection to counteract equity erosion from impaired trade receivables, with recovery efforts underway.