SWOT Analysis of Bank Alfalah

By MatthewS, eHow Contributor
updated: August 1, 2010

Since its establishment in 1992, Bank Alfalah has grown to nearly 200 branches throughout
the middle east. The bank has established itself as a reputable lender with opportunity for
growth. A SWOT analysis can aid in understanding what strengths, weaknesses,
opportunities, and threats may affect this business in coming years.

Strengths
1. The core strength of Bank Alfalah is in providing Halal banking services. Halal is
Arabic for, "that which is permissible"; Halal banking follows traditional Muslim laws. With a
strong market in middle eastern countries. Their position in the oil rich middle east gives
them a strong home market. Additionally, Bank Alfalah notes that they have a strength in
correspondent banking, a form of banking that uses partner banks to transfer funds between
different regions of the globe.
Weaknesses
2. Bank Alfalah's adherence to Halal standards may be a strength in some markets, but
it is a weakness in the west that makes moving outside of its home region market difficult.
Specifically, adhering to Halal standards means that Bank Alfalah cannot offer the same
range of products as conventional banks.
Opportunities
3. With the growth of Islam in the western world, Bank Alfalah has the opportunity to
expand beyond the middle east and into markets in the United States and Europe in order to
offer Halal banking services. Bank Alfalah notes that Islamic banking is currently growing at
twice the rate of conventional banking throughout the world.
Threats
4. The main threat to Bank Alfalah is the threat posed by western banks who are able to
engage in less restrictive sources of revenue generating. Bank Alfalah freely admits that they
do not offer the full range of products of conventional western banks. These banks may pose
a threat to them in their home market and will certainly pose a threat if they choose to
expand into western markets.

Financial Analysis:

Bank Bank Alfalah Ltd - Analysis of Financial Statements

Financial Year 2008 - Financial Year 2009
 

Monday, 26 July 2010 11:24

Highlights - Corporate News

OVERVIEW : Bank Alfalah Limited was incorporated on June 21st, 1992, as a public limited company under
the Companies Ordinance 1984.  The bank is engaged in commercial banking and related services as
defined in the Banking Companies Ordinance, 1962.  The bank privatised in 1997.  The Abu Dhabi Group,
owner of the bank, has invested in technology to have an extensive range of products and services.  They
broadly include general banking, financial services, Islamic banking, consumer banking, treasury and
international banking.  The bank has been assigned short-term rating of A1+ and long-term rating of AA. 

The bank has a network of 282 branches.  This includes Islamic banking branches and foreign
branches inBangladesh, Afghanistan and Bahrain.  Bank Alfalah has expanded its branch network and
deposit base, along with making profitable advances and increasing the range of products and services.  It is
one of the top ten banks of Pakistanin terms of its assets that are 6% of the total banking sector assets. The
banking sector has expanded rapidly in Pakistanalong with the fast paced economic growth.  The increased
competition in the banking sector has encouraged the banks to come up with services that could satisfy the
needs of a large consumer base.  In light of large banking spreads, there has been increasing profitability of
all banks. 

BANKING INDUSTRY IN FY09

Earnings of the banking industry rose 24% (YoY) in FY09 from Rs 53. 2 billion to Rs 66 billion.  This
increase was primarily driven by a rise in the net interest income owing to high banking spreads (difference
between the lending rate and the deposits rate).  In FY09 the average banking spread increased 10. 9%
(YoY).

Group wise Lending & Deposit Rates (outstanding)

     Jun-08  Jun-09

     Lending Deposits  Spread  Lending  Deposits  Spread

PSCB    12. 00   4. 64   7. 36   13. 74    6. 37   7. 37

DPB    11. 94   5. 27   6. 67   14. 23    6. 49   7. 74

FB     15. 05   5. 99   9. 06   15. 62    7. 48   8. 14

All    11. 96   5. 18   6. 78   14. 02    6. 50   7. 52

Banks continue to retain profits and issue bonus shares to increase their equity holdings in order to meet the
State Bank s Minimum Capital Requirement.  Furthermore, expanding branch operations continue to cause
an increase in operating expenses. 

Provisions to NPLs rose in FY09 from 69. 6% to 70. 0%, which covered losses from the higher infection rate
in the year under consideration.  The NPLs to loans ratio increased from 10. 5% in FY08 to 11. 9% in FY09
indicating increasing liquidity crunch due to the higher lending rates. 

The growth in deposits of the banking system has been weakening since January 2008 in the wake of
continuous external account pressures and shift in public preference away from deposits due to high
inflation.  In October 2008, banks suffered a major shock as deposit base eroded by Rs 90 billion due to
concerns on stability of local banks in view of global financial crisis.  This trend however changed in the last
two months of FY09 when the deposit base sharply expanded by Rs 331. 9 billion.  In all terms, deposit
growth decelerated from 13. 8% in FY08 to 7. 8% in FY09. 

Continuing last year s trend, the banking advances witnessed an increasing shift towards the public sector in
light of the heightened credit risk cause by the stock market crash in 2008 followed by the liquidity crunch in
the economy.  ADR decreased from 75. 5% to 69. 7% in FY09 due to rising risk-averseness of the private
banks. 

RECENT PERFORMANCE FY09

BAFL s PAT is down by 31% (YoY) at Rs 0. 897 billion (EPS: Rs 0. 71) during FY09, indicating weaker
performance as compared to the banking industry as a whole, which witnessed a 24% (YoY) increase in the
profits.  This is mainly due to lower net interest income after provisions, which decreased by 1% (YoY) and
higher operating expenses.  Operating expenses, which stood higher by 10% (YoY), are on the rise due to
the expansion in branch network during FY09 (from 199 to 282 branches countrywide in just 2
years).  Meanwhile, the banking industry on average experienced rising NII. 

Provisions increased by 15% (YoY) during FY09 due to the rising infection rate in the 3rd quarter of the
fiscal year, when NPLs of the banking industry rose by 6% (QoQ) to Rs 422 billion. 

Declining brokerage and dividend incomes were substantially covered by income from dealing in foreign
currencies.  The financial markets have shown considerable improvement since FY08 resulting in realized
and unrealized gains on securities, which have been the primary source of the higher non-interest income. 

Deposits showed a modest growth rate of 8% (YoY) showing restoring economic growth.  This growth was
slightly higher than the industry average of 7. 8%, proving suspicions that mid-tier banks were growing faster
than the big 5 banks ofPakistan.  In line with the overall banking industry, Bank Alfalah witnessed a decline
in advances of 2% (YoY) from Rs 191. 791 billion to Rs 188. 042 billion due to heightened credit risk of the
private sector in comparison to the public sector.  This has resulted in a shift towards investments in papers
and bonds of PSEs, leading to a 31% (YoY) increase in investments from Rs 75. 973 billion to Rs 99. 160
billion in FY09.  Lending to financial institutions has shown a dramatic increase in FY09 by 351% and
earning assets have shown a positive growth of 11%.  Borrowing from financial institutions has risen from Rs
13. 690 billion to Rs 20. 653 billion, worsening the ADR from 64% in FY08 to 58% in FY09. 

Furthermore, NPLs have also formed 8. 6% of advances in FY09.  However, it is worth mentioning that
where the overall banking industry has shown a drastic tendency towards increased provisioning against
NPLs, BAFL seems somewhat immune to the general trend.

Bank Al-Falah (CY 09)

                   PKR mn

Income Statement      FY 09   FY 08  % change

 
Interest Earned      35,561  30,967    15%

Interest Expensed    -24,654  -20,494    20%

Net-Interest Income    10,907  10,472     4%

Provisions         4,072   3,543    15%

Net-Interest Income

 (after provisions)    6,836   6,929    -1%

Non-Interest Income    5,182   4,823     7%

Admin/ Others Expenses  11,002   9,957    10%

PBT            1,016   1,795    -43%

Tax             -119   -493    -76%

PAT (Reported)        897   1,301    -31%

EPS (basic/diluted)     0. 71   1. 63    -56%

Balance Sheet      31-Dec-09  31-Dec-08  % chg

Deposits         324,760   300,733   8%

Advances         188,042   191,791   -2%

Investments        99,160   75,973   31%

Lending to FIs       14,947    3,316  351%

Earnings Assets      302,150   271,080   11%

Total Assets       389,070   348,991   11%

Share Capital       13,492    7,995   69%

Shareholders Equity    22,133   17,045   30%

NPLs            16,186    8,934   81%

Ratios

ADR              58%     64%  -9%

NPLs /Advances        8. 61%    4. 66%  85%

Net Interest Margin

 (before provisions)    12. 16    8. 05   51%

Net spread Margin

 (after provisions)     7. 62    5. 32   43%

EARNINGS

The bank s performance has generally worsened in all segments in FY09.  Bank Alfalah Limited (BAFL)
declared profit after tax of Rs 0. 897 billion with an earnings per share of Rs 0. 71 in FY09 as compared to
profit after tax of Rs 1. 301 billion with an earnings per share of Rs 1. 63 in FY08.  As a result, no cash
dividend was declared in FY09. 

Net interest income of the bank registered only a slight growth of 4% to Rs 10. 907 billion in FY09 as
compared to Rs 10. 472 billion in FY08 because 15% rise in interest earned was mostly offset by the 20%
rise in interest expensed.  Even though the bank s spread has increased, profits have fallen. 

Profits have declined due to worsening performance of the earning assets (advances, investments and
lending to financial institutions).  Yield on earning assets has risen from 11. 42% to 11. 77% (YoY) in FY09,
however, at the same time, cost of funding these assets has also increased from 7. 56% to 8. 49% (YoY),
thereby resulting in lower returns.  Furthermore, NPLs to advances have almost doubled in FY09 from 4. 7%
to 8. 6%, reducing the asset quality of the bank. 

RETURNS

ROD has shown a declining trend.  This has been the case because the profits for Alfalah have not risen
proportionally with the increase in deposits.  In FY03 the ROD was 2. 77 that has declined to 0. 28 in 2009. 

Bank Alfalah s ROA has been consistently below the industry average in all 4 quarters of FY09.  While the
industry averaged around 1. 5, Bank Alfalah s ROA came out to be 0. 23.  Moreover, a YoY decline of 38%
was witnessed in FY09 for the bank.  The total assets of the bank have grown by 11% from Rs 348. 99
billion to Rs 389. 07 billion in 2009.  In FY09, EA grew by 11. 46% but the profitability fell by 31%. 

ROE has had a fluctuating trend for the bank.  After falling in FY04, it rose in FY05 on the back of high
profits for the year but declined in the subsequent year.  As the general trend in the banking sector, this
bank is also retaining profits and has had fresh capital inflow.  One reason for this enhanced capital base is
for meeting the minimum capital requirement of the SBP of Rs 23 billion.  The ROE of Alfalah is 4. 05% in
FY09, which is lower than 7. 63% in the previous fiscal year.  This way the bank aims to meet the Basel II
requirements for risk exposures by keeping higher capital in hand. 

Yield is an indicative of the profitability of the bank s assets.  The bank s net interest income (NII) has
increased by 4% in 2009 whereas the non-interest income rose by 7% due to gains on securities held.  But
as in the banking sector the NII contributes the most to income and the low increase in NII is the reason the
bank has witnessed falling profits. 

An important observation in the income of the bank is that its earning assets have been generating
increasing returns over the years.  But overall profitability had not seen great increments because of
increasing costs of funding these earning assets.  This is indicated by a declining interest margin, which is a
ratio of mark-up/return/interest expensed to the mark-up/return/interest income as shown below.  The result
is that though the yields are high, overall profits are low and so ROA, ROE and ROD have shown a declining
trend in 2009.

Year         2003  2004  2005  2006  2007  2008  2009
 

Interest Margin   0. 50  0. 57  0. 41  0. 28  0. 36  0. 34  0. 31

Withholding shares of Warid Telecomm has been cumbersome for Bank Alfalah and in recent times, the
bank is expected to face further capital losses, which are likely to reduce its non-interest income and thus
overall profit after tax. 

NPLs

The non-performing loans (NPLs) have shown variable behavior during the period of analysis, first
increasing from Rs 2. 93 billion in FY03 to Rs 2. 94 billion in FY04, then decreasing by almost two thirds of
that to Rs 1. 06 billion in FY05 then rising again in FY06.  During FY09, NPLs rose by 81% from Rs 8. 93
billion to Rs 16. 2 billion despite beliefs that the economy was stabilizing.  In relation to advances, NPLs
were 8. 6% of the aggregate amount, which is much higher than last year s value of 4. 7% indicating higher
defaults and credit riskiness.  However, the bank s provisions for NPLs also increased in FY09 to
compensate for the credit risk. 

This rise in NPLs can be more accurately attributed to the rapid rise in interest rates during this period than
to any lapse in the bank s screening procedures, as the State Bank has taken definite measures to tighten
its monetary policy.  At the same time there is a high level of indebtedness in both the private sector and
consumer markets.  There was a slowdown in the rapid decline in industry NPLs, which stood at Rs 175
billion at the end of FY06.  Disaggregated industry analysis revealed that there were plenty of fresh NPLs
incurred during this period.  However, extensive write-offs and recoveries managed to reduce the overall
level of NPLs.  The bank is now making greater efforts aimed at the recovery of NPLs, and a tightening of
the loan policies is expected. 

Provisioning against NPLs grew phenomenally during FY07 and amounted to Rs 2. 3 billion over Rs 697. 6
million in FY06.  Bank Alfalah made incremental provisioning of Rs 1. 0 billion during the year due to the
withdrawal of FSV benefit which was the major reason behind the upsurge in the provisions.  This trend
continued over the next three fiscal years. 

In terms of profits the Pakistani banking sector ranks amongst the top ten in the world.  Bank Alfalah has
had its share in the phenomenal profits growth of the banking sector. 

ASSETS

There has been a change in composition of earnings assets with a shift from advances to higher
investments in FY07. This shift is in line with the overall industry trend. 

The ratio of earning assets to total assets for the bank shows remarkable uniformity, suggesting careful
management of and investment in interest generating assets.  Within earning assets, however, the bank
shows a gradual trend of movement of capital into and away from lendings to other financial
institutions.  These declined from 9% of earning assets in FY03 to 0% in FY04, then increased to 13. 3% in
FY05, but were again reduced to 6% in FY06.  Lending to financial institutions were at an all-time high of Rs
14. 95 billion in FY09 (an increase of 351%) as opposed to advances and investments, which fell by 2% and
rose by 31% respectively. 

The trend in investments has been mainly a declining one, from 39% of earning assets in FY03 to about
28% in FY04 and FY05, then again declining to 26% in FY06.  Industry figures substantiate this trend to an
extent, where in FY06 advances increased to 55. 8% of total assets from 54. 4% in FY05, while investment
portfolio decreased from 21. 9% of assets to 19. 2% in the same period.  In addition, 60% of the growth in
banking assets in FY06 was accounted for by growth in advances.  In 2009, however, advances took a back
step in light of credit risk while investments rose in government papers and bonds of PSEs. 

ADR rose between 2003 and 2004 from 64% to 69% but declined thereafter in 2005 to 53%.  This was
followed again by an increase to 63% in response to the high growth rate of the economy.  ADR remained
stable over the next few years, falling FY09 to 58%, as a result of credit riskiness of the economy and rising
NPLs.  Partially, this can be accounted for by the slow growth of deposits and partially by the bank s
unwillingness to risk its assets by lending money to the private sector or consumer markets.  Slowdown in
advances is also due to the high interest rates in the economy as the cost of borrowing money has rapidly
risen in light of a tight monetary policy being followed by the State Bank of Pakistan.  Industry figures also
show that banks have shown an increase in investment portfolios somewhat corresponding to the decline in
loans, showing a shift in banks policy towards lower risks and returns. 

DEPOSITS

Liabilities rose by an astounding 59% in FY04 and a further stunning 61% in FY05, and then a relatively
modest 9% in FY06 and 19% in FY07.  As deposits grew at a declining rate in FY08 and borrowing became
difficult; liabilities only grew by 6% in FY08 followed by an 11% growth in FY09.  The steep increases in debt
in FY04 and FY05 were due to a spectacular rise in deposits in both years. 

Deposits rose from a modest Rs.  76. 7 billion in 2003 by almost 70% to reach Rs.  130 billion in 2004, after
which they again rose by more than 70% to touch Rs.  222 billion in 2005.  Deposits continued to show
strong growth, rising by more than 14% in 2007 to cross Rs.  270 billion.  The major upward trend in
deposits throughout the industry has been the result of the heavy economic activity during recent years
fuelling the demand of consumers and the private sector for credit. The industry has also shown a trend
towards increasing deposits in banks, a major cause of which is, of course, the booming economic activity,
apart from higher foreign inflows in the form of worker remittances and FDI, as well as expanding branch
networks, product innovation and better efforts at marketing.  However, in the last couple of years, a
slowdown has been witnessed in the growth rate of deposits owing to the slow GDP growth rate and
unstable political and social conditions of the country.  Deposits only rose by 10% and 8% in FY08 and FY09
respectively to reach the value of Rs 324. 8 billion in 2009. 

Deposit growth rate was much higher in smaller banks as compared to the top ten banks of Pakistan due to
better deposit rates being offered by the smaller banks.  However, Local Private Banks have shown the
highest deposit growth of any in the banking sector.  Deposits showed consistent growth in both local and
foreign currencies.  Both customer and institutional deposits showed steep growth in 2004 and 2005, while
in 2006, growth in customer deposits slowed while institutional deposits showed a decline.  Deposit growth
had also slowed in the industry as a whole in 2006, declining from 18. 3% in FY05 to 13. 1% in FY06. 

Another marked trend within the deposit structure of the bank was the greater growth shown by fixed
deposits as compared to and at the cost of saving deposits.  Since 2003, deposits have risen 323%, which is
indicative of the growth of the entire banking industry of Pakistan.  The deposits of Bank Alfalah have shown
an increase over the years largely due to increase in fixed deposits by customers. 

Fixed deposits increased by an absolutely stunning 100% and 300% in FY04 and FY05 respectively, and by
a further 11% in FY06, thus attaining a level of almost Rs 89 billion at the end of that year, as compared to a
mere Rs 11 billion at the end of FY03.  However, the growth has now become stagnant due to increasing
outflow of FDI and lack of growth in the economy (GDP growth rate of Pakistan in FY09 stood at a
disappointing 2%).  On the other hand, while savings deposits grew by almost 55% in FY04, their growth
slowed to around 25% in FY05, and actually turned into a 3% decline in FY06, so that their level changed
from Rs 44 billion at the end of FY03 to Rs 79 billion at the end of FY06.  This is a good sign for the bank
since its long-term deposits have risen. 

Deposits increased from Rs 300. 733 billion to Rs 324. 760 billion, an increase of 8% in FY09.  The
composition of deposits shows an interesting mix.  Fixed deposits have risen from Rs 116. 688 billion to Rs
121. 729 billion, an increase of 4. 32% in FY09.  Similarly, current accounts have risen from Rs 78. 316
billion to Rs 88. 461 billion, an increase of 13. 0% in FY09.  However, savings deposits have fallen from Rs
86. 416 billion to Rs 83. 905 billion in FY09.  Due to banks eagerness for raising longer-term deposits to
match their assets maturity profiles, it is expected that the share of fixed deposits in total deposits of the
banking system would continue to further increase in days ahead. 

DEBT MANAGEMENT

The debt management figures show that the assets of the bank have become less leveraged during the
current period. This was due to the fact that the debt has increased but equity has increased by a greater
percentage in recent years. Equity increased by 11% in FY04, 42% in FY05, 64% in FY06 and 32% in
FY07.  Due to the stock market crash in 2008, when the index fell drastically and share prices declined, the
value of equity decreased drastically and hence, in FY08 equity increased only by 5% followed by a 30%
rise in FY09. 

The solvency situation for the industry as a whole showed marked improvement until 2006, caused by
increasing profitability and fresh inflows of capital.  The figures for the bank show that there was a decline in
the solvency position in 2005 as a result of high growth in deposits.  As a result, from financing 4% of assets
in FY04, equity financed around 3% of assets in FY05.  This situation, however, has improved in 2006
because of increases in equity, which once again financed almost 4% of assets.  However, earning assets in
comparison to deposits declined from around 1. 03 in FY04 to 0. 97 in FY05 and 0. 96 in FY06.  This is
caused by the fact that while deposits have shown tremendous growth over the period under study, the bank
has maintained a consistent approach with respect to its earning assets and has not expanded them to the
same extent.  The increase in MCR by the SBP has also led to banks increasing their capital share.  Equity
continues to rise as part of the MCR and as of 2009, funds 6% of the bank s assets. 

STOCKHOLDERS RETURNS

Dividend payout has been fairly low throughout the bank s operating history starting with Re 1 per share in
2003 to Rs 1. 78 per share in 2004 and Rs 1. 22 per share in 2005.  This was followed by a zero payout in
2006 despite a good performance of the bank but the shareholders were rewarded in 2007 with Rs 1. 5 per
share.  Following the troubled times in 2008 and 2009, the bank decided not to payout cash dividend in
these years.  Instead, to increase the capital of the bank, bonus shares have been issued consistently over
the years with shares worth Rs 1. 499 billion issued in 2009. 

Dividend yield has been on the decline since 2003 as share prices were rising and dividend payout was
falling.  In 2007, share prices started falling amid speculation and hence, did not affect the dividend yield too
strongly even though dividend per share was at an all time low.  Since the stock market crash in 2008, the
share price has fallen drastically owing to the reduction in the KSE Index to 6000 points.  Share price
currently stands at Rs 9. 33. 

MARKET VALUE

Price to earnings ratio rose between 2003 and 2006.  EPS was declining and share price was rising, which
showed that investors believed that the future prospects of the bank looked good.  This was the time of high
economic growth when trading was booming.  In 2007, the P/E ratio fell because of a 145% increase in
EPS.  In 2008, the EPS fell drastically, however share price remained somewhat stable, hence a high P/E
ratio culminated but after the stock market crash, when the share price fell to less than one-third and EPS
too plummeted, the P/E ratio fell to 18. 14. 

Market value to book value has shown inconsistency within a range.  The market value has stayed about
twice as much as the book value showing investor confidence in the operations of Bank Alfalah.  However,
in FY09, this ratio fell to 0. 74 indicating the hard times the bank was going through and how the investors
are losing confidence that the bank s future operations will prove to be profitable. 

FUTURE OUTLOOK

The 2009 witnessed a slow economic growth rate for Pakistan (2%).  With impeded growth in the private
sector, the banking sector is likely to suffer as a whole with a slow deposits growth rate and less
opportunities for investments in less risky private enterprises.  High inflation (11%), poor global standings
and low returns are likely to affect FDI in the country adversely as well.  Continued funding to ease the
public debt will stifle private investment and further lead to macroeconomic problems such as high inflation,
low social mobility and poverty. 

SBP has maintained its tight monetary stance by keeping the discount rate at 12. 5 percent.  Also, it has
allowed banks to avail 40% FSV benefit of collateral for calculating provisioning requirement ie on
mortgaged residential/commercial/industrial land (open plot, and where building is constructed, separate
valuation of land must be available) held as collateral against non-performing loans from three years to four
years from the date of classification of that particular loan or facility. 

The SBP had cut Cash Reserve Requirement ratio (CRR) by 4% to 5%, and excluded one year and above
tenor deposits from Statutory Liquidity Requirement (SLR) of 10% to ease liquidity pressures.  SBP has also
directed banks to bring ADR ratio to 70%, which could depress loan growth in absence of deposit
mobilization.  As a result, banking assets growth will now be anchored more towards economic
fundamentals and sector s ability to attract long-term deposits at higher rates. 

For BAFL, future expansion through low cost funding sources might help in near future.  The operating
expenses are likely to continue the upward trend as the bank plans to expand its network further while net
provisioning is also expected to increase relatively given lower NPLs coverage (against specific
provisioning) as of Sep 2008.  Penetration in Small and Medium Enterprises (SMEs) segment and
expansion in the Middle East markets are some of the opportunities that BAFL can tap.  BAFL can also
enhance its deposits growth rate with higher returns to depositors as many small and medium-sized banks
have been doing for the past year.

BANK AL-FALAH FINANCIALS

Balance Sheet                     2003      2004      2005      2006      2007      2008      2009

Assets

-----------------------------------------------------------------------------------------------------------------------------------------------------
Cash and balance with treasury banks       8,423,399   19,708,518   24,798,070   27,859,360   29,436,378   32,687,335   35,056,012

Balances with other banks              626,917   3,183,957   5,713,369   12,731,952   18,380,738   21,581,043   22,722,639

Lending to financial institutions         7,437,733       0   27,050,493   12,456,653   3,452,059   3,315,500   14,947,435

Investments                   28,903,596   35,503,196   57,416,255   56,502,210   88,491,564   75,973,238   99,159,957

Advances                     49,216,120   88,931,400  118,864,010  149,999,325  111,198,992  191,790,988  188,042,438

Other assets                   1,553,108   3,226,959   3,851,529   5,633,051   6,013,097   9,869,367   14,649,380

Operating fixed assets              2,791,626   4,280,504   6,620,067   10,502,990   11,922,324   13,773,193   14,492,154

Deferred tax asset                    0       0       0       0       0       0       0

Total Assets                   98,952,499  154,834,534  248,313,793  275,685,541  328,895,152  348,990,764  389,070,055

-----------------------------------------------------------------------------------------------------------------------------------------------------

Liabilities

-----------------------------------------------------------------------------------------------------------------------------------------------------

Bills payable                   1,208,671   2,233,671   3,733,124   3,091,135   4,138,243   3,452,031    3,766144

Borrowing from financial intuitions       13,127,754   12,723,830   5,844,389   8,394,130   21,230,657   13,650,222   20,653,921

Deposits and other accounts           76,698,322  129,714,891  222,345,067  239,509,391  273,173,841  300,732,858  324,759,752

Sub-ordinated loans                 649,740   1,899,480   3,223,355   3,223,355   3,220,858   2,571,169   7,570,181

Liabilities against assets subject to fanatic       0       0       0       0       0       0       0

Other liabilities                 2,186,754   2,725,344   5,219,666   7,305,496   9,531,860   11,291,280   10,006,786

Deferred tax liabilities              323,010    275,834    484,066   1,921,338   1,379,809    203,465    179,351

Total Liabilities                94,194,251  149,573,050  240,849,667  263,444,845  312,675,308  331,946,025  366,936,635

Net assets                    4,758,248   5,261,484   7,464,126   12,240,696   16,219,844   17,044,739   22,133,420

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Represented by

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Share capital                   2,000,000   2,500,000   3,000,000   5,000,000   6,500,000   7,995,000   13,491,563

Reserves                      790,374   1,008,772    2351218   2,745,533   2,414,833   3,166,056   3,587,565

Unappropriated profit                963,042    860,300   1,386,845   2,323,072   4,851,841   3,447,467   2,690,728

                         3,753,416   4,369,072   6,738,063   10,572,605   13,766,674   14,608,523   19,770,260

Surplus on revaluation of assets -net of defe   1,004,832    892,412    726,063   1,669,340   2,453,171   2,436,216   2,363,160

Equity                      4,758,248   5,261,484   7,464,126   12,241,945   16,219,845   17,044,739   22,133,420

Weighted average number of ordinary         250,000    280,428    296,016    606,132    650,000    799,500   1,267,533

Average share price                    -       46       49       53       65       46       13

Mark-up/return/interest earned          4,033,380   5,620,203   12,246,811   21,191,470   25,816,457   30,966,638   35,561,312

Mark-up return/interest expensed         2,028,577   2,434,459   7,204,992   15,232,886   16,645,178   20,494,355   25,654,180

Net mark-up/interest income            2,004,803   3,185,744   5,041,819   5,958,584   9,171,279   10,472,283   10,907,132

Provision against non-performing loans       -87,091    -370,208    -402,298    -697,690   -2,370,867   -2,035,997   -3,694,546

Provision for diminution in value of invetn        0     -2,165       0       0       0   -1,479,062    -317,164

Bad debts written off directly             -418      -351      -512     -1,537     -5,844    -28,298    -59,817

                          -87,509    -372,724    -402,810    -699,227   -2,376,711   -3,543,357   -4,071,527

Net mark-up/interest income after pro       1,917,294   2,813,020   4,639,009   5,259,357   6,794,568   6,928,926   6,835,605

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Non Mark-up/Interest Income

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Fee, commission and brokerage income        399,383    675,868   1,153,747   1,864,584   2,556,284   2,116,818   1,913,004

Dividend Income                   112,017     52,539     52,014     37,523     52,686    300,943    248,217

Income from dealing in foreign currencies      106,848    218,820    290,091    386,997    474,510    914,845   1,019,132

Gain on sale of securities                -       -    239,551    188,971   2,044,444    424,261    688,924

Unrealized gain/loss on revaluation

 of investments classified as held for          -       -     23,163    -28,372    ,14,696    -181,571     2,849

Other income                   2,773,503    572,822    504,967    840,920   1,029,012   1,247,628   1,309,527

Total non-markup/interest income         3,391,751   1,520,049   2,268,533   3,290,623   6,142,240   4,822,924   5,182,253

                         5,309,045   4,333,069   6,907,542   8,549,962   12,936,808   11,751,850   12,017,858

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Non mark-up/interest expenses

Administrative expenses              1,799,490   2,677,635   4,313,023   5,952,637   8,383,322   9,805,790   10,923,507

Other provisions/write-offs              2,000       0     10,125       0     8,593     28,582     -1,419

Other charges                     1,875     1,700     21,104     43,306     9,565    122,758     79,454

Total non-mark up/interest expenses        1,803,365   2,679,335   4,344,252   5,995,943   8,401,480   9,957,130   11,001,542

                         3,505,680   1,653,734   2,563,290   2,554,019   4,535,328   1,794,720   1,016,316

Extraordinary/unusual items                0       0       0       0       0       0       0

Profit before taxation              3,505,680   1,653,734   2,563,290   1,906,672   5,004,600   1,794,720   1,016,316

Taxation

For the period Current              1,364,723    536,159    592,635    481,150   1,743,247   1,730,051   1,066,301

Deferred                      -13,671     -3,663    267,524    427,902    -321,329   -1,151,019    -767346
For prior year, Current               22,837    -30,000     -7,000

Deferred                       8,507     9,249     8,037    -100,874      360    -85,613    -179,674

Net Taxation                   1,382,446    561,745    861,196    581,283   1,497,863    493,419    119,281

Profit after taxation               2,123,234   1,091,989   1,702,094   1,325,389   3,506,737   1,301,301    897,035

Unapropriated profit brought forward as re     250,050    463,042    860,300   1,886,845   2,823,072   4,851,840   3,447,467

Effect of change in accounting policy with r    250,000    500,000       0       0       0       0       0

Unappropriated profit brought forward as r     500,050    963,042    860,300   1,886,845       0       0       0

Transfer from general reserve               0       0       0       0       0       0       0

Transfer from sur-plus on revaluation of fixe    14,405     23,667     24,870     26074     24585     24,586     24,696

Profits available for appropriation        2,637,687   2,078,698   2,587,264   3,675,610   5,977,886   6,177,727   4,369,198

Appropriations

Transfer to statutory reserve           -424,647    -218,398    -340,419    352,538    -626,046    -260,260    -179,407

Bonus shares                   -1,000000    -500,000    -500,000    -500,000   -1,500,000   -1,495,000   -1,499,063

Dividend                      -250,000    -500,000    -360,000       0       0    -975,000       0

                         -1,674,647   -1,128,398   -1,200,419   -852,9538   -2,126,C46   -2,730,260   -1,678,470

Unappropriated profit carried forward        963,040    860,300   1,386,845   2,823,072   3,851,840   3,447,467   2,690,728

Basic and diluted earnings per share          8. 49      4. 37      3. 92      2. 2      5. 39      1,63      0. 71

Dividend for the year                500,000    360,000       0       0    975,C00       0       0

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Earnings Ratios

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RCA                          2. 15      0. 71      0. 69      0. 48      1. 07      0. 37      0. 23

ROE                          44. 62     20. 75     22. 80     10. 83     21. 62      7. 63      4. 05

ROD                          2. 77      0. 84      0. 77      0. 55      1. 28      0. 43      0. 28

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Asset Quality Ratios

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                                         -639E-01    1. 18E+00    7. 42E-01    1. 22E+00    8. 12E+01

NPL                        2. 93E-06   -6. 39E+06    1. 06E+06    2. 31E+06    4. 03E+06    8. 53E+06    1. 62E+07

NPL to Advance                     6. 0%      3. 3%      0. 9%      1. 5%      2. 4%      4. 7%      8. 6%

Provisions                     1360056    1360057    1552981    2236456    3151396    3543357    4071527

Provision to NPL                    0. 46      0. 46      1. 47      0. 97      0. 78      0. 40      0. 25

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Market Value Ratios

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Price to earning                    0. 00     10. 50     12. 43     24. 19     12. 04     28. 43     18. 14

Market value to book value               0. 00      2. 45      1. 93      2. 64      2. 60      2. 17      0. 74

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Debt Management

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Debt to equity                    19. 80     28. 43     32. 27     21. 52     19. 28      2. 17     16. 53

Debt to assets                     0. 95      0. 97      0. 97      0. 96      0. 95      0. 95      0. 94

Deposit times capital                 16. 12     24. 65     29. 79     19. 57     16. 84     17. 64     14. 67

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Liquidty

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Earning assets to assets                0. 86      0. 80      0. 82      0. 79      0. 30      0. 78      0. 78

Advance to deposit                   0. 64      0. 69      0. 53      0. 63      0. 63      0. 64      0. 58

Yield on earning assets                4. 71%      4. 52%     6. 02%      9. 68%     9. 81%     11. 42%    11. 77%

Cost of funding earning assets            2. 37%     1. 96%     3. 54%      6. 96%     6. 33%     7. 56%     8. 49%

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Solvency

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Equity to assets                   4. 81%     3. 40%     3. 01%     4. 44%     4. 93%     4. 88%     5. 69%

Equity to deposits                  6. 20%     4. 06%     3. 36%     5. 11%     5. 94%     5. 67%     6. 82%

Earning assets to deposits               1. 12      0. 98      0. 96      0. 97      1. 03      0. 97      1. 00

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Dividend Payout

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Dividend yield                           -3. 88%     -2. 50%     0. 00%     2. 31%     0. 00%     0. 00%

Dividend cover                    -8. 49     -2. 45     -3. 22             3. 59       -       -

Dividend per share                  -1. 00     -1. 78     -1. 22      0. 00      1. 50      0. 00      0. 00

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Other Ratios (to be included)

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Cost of funds                     2. 26%     1. 71%     3. 16%     6. 14%     5. 65%     6. 52%     7. 43%

Intermediation cost                  2. 00%     1. 88%     1. 89%     2. 40%     2. 85%     3. 12%     3. 16%

Net profit margin                   2. 36%     0. 77%     0. 77%     0. 53%     1. 19%     0. 41%     0. 26%

Interest margin                    0. 50      0. 57      0. 57      0. 28      0. 36      0. 34      0. 31

Net interest margin                  0. 57      1. 93      1. 93      3. 13      1. 83      5. 84     10. 73

COURTESY: Economics and Finance Department, Institute of Business Administration, Karachi, prepared

this analytical report for Business Recorder. 

DISCLAIMER: No reliance should be placed on the [above information] by any one for making any financial,
investment and business decision.  The [above information] is general in nature and has not been prepared
for any specific decision making process.  [The newspaper] has not independently verified all of the [above
information] and has relied on sources that have been deemed reliable in the past.  Accordingly, the
newspaper or any its staff or sources of information do not bear any liability or responsibility of any
consequences for decisions or actions based on the [above information].