OVERVIEW (July 26 2010): 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 in Bangladesh, 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 Pakistan in terms of its assets that are 6% of the total banking sector assets.

The banking sector has expanded rapidly in Pakistan along 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 of Pakistan. 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 ----------------------------------------------------------------------------------------------------------------------------------------------------- Represented by ----------------------------------------------------------------------------------------------------------------------------------------------------- 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 ----------------------------------------------------------------------------------------------------------------------------------------------------- Non Mark-up/Interest Income ----------------------------------------------------------------------------------------------------------------------------------------------------- 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 ----------------------------------------------------------------------------------------------------------------------------------------------------- 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 ----------------------------------------------------------------------------------------------------------------------------------------------------- Earnings Ratios ----------------------------------------------------------------------------------------------------------------------------------------------------- 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 ----------------------------------------------------------------------------------------------------------------------------------------------------- Asset Quality Ratios ----------------------------------------------------------------------------------------------------------------------------------------------------- -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 ----------------------------------------------------------------------------------------------------------------------------------------------------- Market Value Ratios ----------------------------------------------------------------------------------------------------------------------------------------------------- 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 ----------------------------------------------------------------------------------------------------------------------------------------------------- Debt Management ----------------------------------------------------------------------------------------------------------------------------------------------------- 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 ----------------------------------------------------------------------------------------------------------------------------------------------------- Liquidty ----------------------------------------------------------------------------------------------------------------------------------------------------- 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% ----------------------------------------------------------------------------------------------------------------------------------------------------- Solvency ----------------------------------------------------------------------------------------------------------------------------------------------------- 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 ----------------------------------------------------------------------------------------------------------------------------------------------------- Dividend Payout ----------------------------------------------------------------------------------------------------------------------------------------------------- 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 ----------------------------------------------------------------------------------------------------------------------------------------------------- Other Ratios (to be included) ----------------------------------------------------------------------------------------------------------------------------------------------------- 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.

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