AKD Securities Limited - Off the Analyst's Desk

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AKD Securities Limited – Off the Analyst’s Desk

March 13, 2023

Karachi, March 13, 2023 (PPI-OT): BAFL: Analyst Briefing Key Takeaways

To note, BAFL posted NPAT of PkR18.2bn (EPS: PkR11.5) for CY22, higher by 28% compared to the earlier year. For the final quarter, the bank reported NPAT of PkR4.1bn (EPS: PkR2.6) lower by 24%QoQ and higher by 10%YoY.

The bank’s net deposits increased by 31% over the course of CY22, with the bank’s market share in terms of deposits enhancing from 5.1% at CY21 end to 6% in CY22. The share of Current Accounts in the bank’s deposits increased meagerly to 44.5% at the end of CY22, compared to 44.0% in CY21.

Contrary to the trend in the banking sector, BAFL’s Fixed deposits witnessed an increase to 28.3% at the end of CY22, compared to 20.9% in CY21. The management apprised that these fixed deposits had short-term maturities with fixed rates, and increasing the share of the same in the deposits was a strategic move with the bank foreseeing an interest rate hike.

As for the lending book, the management apprised that there was no significant stress on the Advances portfolio so far in CY23, with the first quarter having pretty much passed. At the end of the year, the bank had a coverage of 108%. Going forward, the bank will continue to be cautious in its lending approach.

Regarding the investment portfolio, the management disclosed that 15% of the Pakistan Investment Bonds portfolio was held in Fixed instruments, while the rest were in floaters. The former’s duration stood at 3-3.5yrs.

BAFL’s equity in Afghanistan has been completely provided for, hence no charge against the same is expected going forward. However, in the event of a downgrade on Pakistan’s sovereign entity rating by the S and P, a further provision against the same could be expected.

The bank is currently operating a branch network of 894 branches, with ~100 branches added during the outgoing year. The bank attributed the 36%YoY increase in operating expenses in CY22 to the same. BAFL management also guided towards the bank adding ~140 branches during CY23, which would make it 1,000+ branch network by the end of the year.

The bank’s NIMs clocked in at 4.6% in 4QCY22. With the 300bps increase in interest rates in the recent past, the bank is of the view that higher NIMs could be witnessed in the upcoming quarters.

BAFL raised ADT-1 Capital to the tune of PkR7bn during the course of the year. At the end of the year, the bank’s CAR stood at 13.8%, above the 11.5% SBP requirement.