Earnings Report /
Pakistan

Allied Bank: 2QCY21 result review – robust NII leads to earnings beat

  • ABL has posted consolidated 2QCY21 EPS of PKR4.16, up 4%yoy and 16%qoq

  • The result is above our estimated EPS of PKR3.36 resulting from sharply higher NII and strong capital gains

  • We maintain our Buy rating

Yusra Beg
Yusra Beg

Senior Investment Analyst

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Intermarket Securities
17 August 2021

ABL has posted consolidated 2QCY21 NPAT of PKR4.8bn (EPS: PKR4.16), up 4%yoy and 16%qoq. This takes 1HCY21 NPAT to PKR8.9bn (EPS: PKR7.75), up 5%yoy. The result is significantly above our estimated EPS of PKR3.36 resulting from sharply higher NII, up 13%qoq, and strong capital gains (PKR1.1bn). ABL announced an interim cash dividend of PKR2.0 – in line with expectations; this takes 1HCY21 payout to PKR4.0/sh.

2QCY21 Key result highlights include:

  • ABL has reported a strong NII of PKR12.2bn up 13%qoq but lower by 9%yoy, significantly above our estimated PKR11.3bn. Relative to other banks which have reported results so far, this is a much faster pick-up (+5%qoq for our IMS Universe).

  • ABL has booked net provisioning reversals of PKR171mn, largely in line with expectations. ABL’s asset quality remains one the best (1QCY21 NPL ratio: 3.2%) led by high public sector and low consumer exposure.

  • Non-interest income rose 2%yoy and 6%qoq to PKR4.3bn. Fee income has jumped sharply by 28%yoy to PKR1.8bn – likely due to recovering trade commissions. This, together with consistently over PKR1bn capital gains per quarter this year, have provided the bulk of the support to NFI.

  • Core admin expenses rose 11%yoy and a modest 5%qoq to PKR8.4bn. Cost control is apparent with ABL’s C/I coming down to 52% vs. 55% in 1Q.

  • The effective tax rate has risen to 41% in 2QCY21 vs. 40% in 1QCY21 but much lower vs. 45% SPLY.

ABL’s asset quality strength remains intact and we are particularly impressed by the sharp rise in NII. ABL is delivering strong growth in NFI although much of this is arising from unrealized gains. We maintain our Buy rating.