Karachi, February 27, 2025 – The State Bank of Pakistan (SBP) has imposed a monetary penalty of over Rs 222 million on Bank Alfalah, as per a report released on Thursday.
The penalty was disclosed in Bank Alfalah’s annual report for the year ending December 31, 2024. Although significant, the penalty is lower than the Rs 279 million imposed in the previous year.
The SBP imposes monetary penalties on banks for non-compliance with regulatory provisions. Despite this, Bank Alfalah has demonstrated robust financial performance, delivering its highest-ever profit in 2024. The bank expects its profitability to stabilize with a reduction in interest rates within a more stable economic environment.
Interest rates declined from a peak of 22% in June 2024 to 13% by December 2024, followed by an additional 100-basis-point cut in January 2025. According to Bank Alfalah, the policy rate is expected to remain largely unchanged in the near term. As a result, the bank anticipates its net interest income to remain stable, as the benefits from volumetric growth will be counterbalanced by narrower spreads.
Similarly, despite an increase in transaction volume, growth in fee, commission, and foreign exchange income is expected to remain flat due to reduced currency volatility and changes in the Benazir Income Support Programme (BISP) mandate, along with revisions in SBP’s remittance rebate scheme.
The sharp decline in interest rates, coupled with a strong rally in the Pakistan Stock Exchange (PSX) in 2024, allowed Bank Alfalah to realize substantial capital gains from both money markets and capital markets. However, similar opportunities may be limited in 2025, which could restrict overall revenue growth.
Bank Alfalah remains committed to expanding its footprint by adding new branches, deploying additional ATMs, Cash Deposit Machines (CDMs), and Cheque/Cash Deposit Machines (CCDMs), despite ongoing import and payment-related challenges. The bank acknowledges that initial costs associated with these initiatives may impact short-term profitability but considers them essential for long-term market share growth.
To maintain its growth trajectory, Bank Alfalah aims to achieve a 10%-15% increase in deposits compared to the previous year. The bank is also focused on optimizing its cost of deposits in both conventional and Islamic segments while improving average deposits and expanding its current account base. Furthermore, with greater market stability and lower interest rates, Bank Alfalah plans to enhance lending spreads and continue supporting the SME and consumer sectors, with advances expected to grow in double digits.
Uncertainties That Could Impact Bank Alfalah’s Operations
All forward-looking statements are inherently subject to risks and uncertainties, some of which are beyond the bank’s control. These risks may impact Bank Alfalah’s resources, revenues, and operations over short, medium, and long-term horizons. Key factors include:
• Changes in discount rate/monetary policy;
• Geo-political risks and uncertainties within operating regions;
• Law and order situations;
• Cybersecurity threats;
• Local government regulations;
• Trade policies of partner countries;
• Shifts in regulatory priorities;
• Inflation, fuel, and commodity price fluctuations;
• Corporate taxation policies; and
• Rising competition from FinTechs and digital banks.
Despite these challenges, Bank Alfalah remains resilient due to its strong financial position, robust internal controls, and stress-tested processes. The results of various stress tests conducted in 2024 were presented to the bank’s management and board committees, providing critical insights for future planning and strategic decision-making. Moving forward, Bank Alfalah continues to focus on sustainable growth while mitigating risks associated with the evolving financial landscape.
