Qudsia Bano

Allied Bank Limited, a prominent name in the banking sector, has revealed its financial performance for the first half of the ongoing calendar year ending on June 30, 2023, showing impressive results and underscoring its ability to capitalise on market opportunities and deliver substantial growth. During the six-month period, the bank's markup interest reached an impressive Rs168.90 billion, showcasing a substantial year-on-year growth of 93%. This remarkable growth is attributed to the bank's adept management of its lending portfolio, resulting in increased interest-related income.

The net markup interest income for the first half of the year amounted to Rs50.65 billion, marking a remarkable 84% year-on-year increase. This substantial growth reflects the bank's success in optimising its interest-related revenue streams and effectively managing its interest expenses. Allied Bank's non-markup interest income for the six months stood at Rs12.19 billion, indicating an 11% year-on-year increase.

This growth highlights the bank's diversified revenue sources beyond traditional lending activities. The bank's total income for the six months reached Rs62.83 billion, reflecting a significant 63% growth compared to the same period last year. This comprehensive income figure demonstrates Allied Bank's ability to generate revenue from multiple avenues. The profit-before-tax for the six months amounted to Rs35.51 billion, showcasing a notable 77% increase compared to the same period last year. This surge in profitability underscores the bank's efficient risk management and successful market strategies.

The profit-after-tax for the six months amounted to Rs17.64 billion, demonstrating an extraordinary year-on-year growth of 158%. This surge in profitability highlights the bank's adeptness in managing its financials and capitalising on market opportunities. The earnings per share (EPS) for the six months stood at Rs15.40, reflecting an impressive 158% growth compared to the corresponding period last year. This remarkable growth in EPS indicates that the bank's earnings available to shareholders have multiplied significantly on a per-share basis.

Allied Bank Limited's financial performance for the three-month period ending on June 30, 2023 reaffirms the bank's strength in capturing market opportunities and delivering substantial growth. During this quarter, the bank's markup interest reached Rs94.93 billion, reflecting a remarkable 96% year-on-year increase. This growth underscores the bank's ability to generate income through its lending activities. The net markup interest income for the quarter amounted to Rs30.21 billion, marking a significant 102% year-on-year increase.

This growth indicates the bank's proficiency in optimising its interest-related revenue streams. Allied Bank's non-markup interest income for the quarter stood at Rs4.97 billion, reflecting a decrease of 26% compared to the same period last year. This decrease may be attributed to changing market conditions and dynamics. Overall, the bank's total income for the quarter reached Rs35.18 billion, reflecting a substantial 62% growth compared to the corresponding period last year.

This comprehensive income figure highlights Allied Bank's ability to generate revenue from various sources. The profit-before-tax for the three months amounted to Rs21.94 billion, demonstrating an impressive 82% year-on-year growth. This growth underscores the bank's effective financial management and ability to capitalise on market opportunities. The profit-after-tax for the quarter amounted to Rs9.95 billion, reflecting an extraordinary 404% increase from the same period last year.

This remarkable growth demonstrates the bank's success in delivering substantial profits to its stakeholders. The EPS for the quarter stood at Rs8.69, reflecting a remarkable 402% increase compared to the corresponding period last year. This significant growth in EPS highlights the bank's ability to generate higher earnings available to shareholders on a per-share basis.

Net profit margin (%)

The net profit margin measures the portion of revenue that translates into net profit after accounting for all costs and expenses. Over the three-year period since 2020, Allied Bank's net profit margin has shown a gradual decline, dropping from 16.31% in 2020 to 9.84% in 2022. This could be attributed to various factors such as increased competition, changing economic conditions, or evolving market dynamics. While the bank's profitability remains relatively strong, the decreasing net profit margin warrants further exploration into cost management and revenue generation strategies.

EPS growth (%)

Earnings per share (EPS) growth reflects the increase or decrease in the company's earnings available to shareholders on a per-share basis. The growth trajectory of Allied Bank's EPS has experienced fluctuations over the years. After a decline of 4.00% in 2021, the bank rebounded with a positive growth of 22.42% in 2022. This rebound signifies the bank's resilience and its ability to adapt to changing circumstances. The significant growth in 2022 reflects improved earnings available to shareholders, possibly due to effective financial management and capital utilisation.

PEG (Price/Earnings to Growth) Ratio

The PEG ratio assesses the relationship between a company's price-to-earnings (P/E) ratio and its EPS growth rate. A PEG ratio of less than 1 typically suggests undervaluation relative to expected growth. Allied Bank's PEG ratio of 0.15 in 2022 indicates that the bank's stock might be undervalued relative to its earnings growth. However, the PEG ratio of -1.36 in 2021 suggests a disconnect between the P/E ratio and the negative EPS growth, which could imply that investors may have had concerns about the bank's future prospects.

About the bank

Allied Bank Limited is a scheduled bank engaged in commercial banking and related services. The long-term credit rating of the bank assigned by the Pakistan Credit Rating Agency Limited is ‘AAA’. The short-term rating of the bank is ‘A1+’. Ibrahim Holdings (Private) Limited is the parent company of the bank and its registered office is in Pakistan. The bank is the holding company of ABL Asset Management Company Limited.

Credit: INP-WealthPk