Bank Alfalah Limited, one of Pakistan’s leading banks, is considering a shift towards quarterly dividend payouts, reflecting a move in line with current market dynamics.
This deliberation, disclosed during a corporate briefing held on Thursday, indicates a potential adjustment to the bank’s dividend policy, pending final approval from its Board of Directors.
Analysts from Arif Habib Limited, who attended the briefing, revealed this development. The bank’s contemplation of quarterly dividends comes on the heels of its robust financial performance in the fourth quarter of CY23. Bank Alfalah reported a post-tax profit of PKR 9.1 billion, marking a substantial 120% year-on-year increase and a 2% quarter-on-quarter rise. This surge in earnings was chiefly fueled by a growth in total income.
For the entire CY23, Bank Alfalah reported a post-tax profit of PKR 36.5 billion, demonstrating a noteworthy growth trajectory compared to the previous year. Alongside these financial results, the bank announced a final dividend of PKR 5 per share for CY23, indicating a potential move towards a more frequent distribution of profits to its shareholders.
In CY23, Bank Alfalah achieved a significant milestone by surpassing PKR 2 trillion in deposits, marking a remarkable 40% year-on-year growth. This achievement underscores the bank’s strengthened market position and its ability to attract deposits.
The bank’s investment portfolio allocation includes 15% in Fixed PIBs, 20% in T-bills, and the remainder in Floater PIBs. The Fixed PIB portfolio boasts an average yield of approximately 14%, with an average duration of 2 to 2.5 years. Meanwhile, the pricing duration for floating PIBs ranges from 2.5 to 3 months.
Despite cautious lending strategies leading to stagnant year-on-year advances, Bank Alfalah maintains a Gross ADR of 37.3%. This conservative lending approach, amidst robust deposit growth, reflects the bank’s prudence in navigating prevailing economic conditions.
With a coverage ratio of 112.2% and an infection rate of 4.8%, Bank Alfalah maintains a healthy asset quality. However, administrative expenses surged by 30% year-on-year in CY23, attributed to branch expansion, inflation, technology, marketing costs, and currency depreciation.
Bank Alfalah’s robust financial performance is reflected in its impressive return metrics, with a ROE of 32.5% and a ROA of 1.4%. Additionally, the bank boasts a CASA ratio of 69.3% (as of December 2023), although slightly lower than the same period last year.
With a current CAR of 16.7%, comfortably above regulatory requirements, Bank Alfalah remains well-capitalized to support its growth initiatives. The bank plans to open 150 new branches in CY24, with a significant portion dedicated to Islamic banking.
Looking ahead, Bank Alfalah anticipates sustaining its growth momentum throughout CY24, focusing on volumetric expansion driven by an expanded branch network. With an expected deposit growth of 15-20% in CY24, the bank remains committed to capturing a larger market share.
Furthermore, the management anticipates a 100 basis points rate cut in the April 2024 monetary policy, which could potentially stimulate further economic activity and bolster the bank’s lending operations.