Earnings Report /
Pakistan

Bank Alfalah: Result review – Strong beat in 1QCY22 results!

  • BAFL posted EPS of PKR2.83 in 1QCY22, up 48%yoy / 35%qoq, versus expected EPS of PKR2.15. Earnings are high quality

  • Strong revenue growth, driven by NII and fee, has more than offset higher admin expenses. Asset quality is in control

  • The result cements BAFL's positioning as one of the best placed in a high interest rate setting. Our TP is PKR50

Raza Jafri
Raza Jafri

Executive Director, Research

Yusra Beg
Yusra Beg

Senior Investment Analyst

Intermarket Securities
26 April 2022

BAFL has posted consolidated NPAT of PKR5.0bn (EPS: PKR2.83) in 1QCY22, up a very strong 48%yoy / 35%qoq. The result beat our expected EPS of PKR2.15 by some distance, with positive surprise on net interest income and fee. The effective tax rate came in at just 36%, but the result would still be a beat even if this is normalized.  

Key highlights include:

  • Strong 38%yoy / 17%qoq growth in net interest income to PKR14.3bn, with margin expansion coming through forcefully. NII growth should accelerate in coming quarters, as the impact of April’s 250bps rate hike transmits through.

  • Fee income of PKR2.5bn, up 31%yoy / 10%qoq. Fx income has also remained robust. Headline non-interest income growth is 13%yoy but increases to 56%yoy if capital gains are excluded (high base last year).

  • Admin expenses are up 22%yoy / 6%qoq. However, the sharp revenue increase means Cost/Income is at 55% vs. 59% in CY21. As revenue further picks up, driven by NII, the Cost/Income may show further improvement this year.

  • Asset quality is evidently in control, as seen by the total provisions of just PKR386mn, vs. a quarterly average of PKR578mn in CY21.

BAFL has posted a very strong and high quality result in 1QCY22, cementing its positioning as one of the best placed banks in a high interest rate setting. BAFL is growing quickly, is cheap on valuations (CY22f P/B of 0.5x and P/E of 3.2x), and offers a healthy dividend yield of more than 11%. Our Dec’22 TP is PKR50/sh. Buy!