Experts say ABL must do something needful to curtail abnormally high mark-up and operating expenses, eating at the profit, depriving shareholders of their due share
M Jahangir Hayat
LAHORE: Allied Bank Limited (ABL) profit earnings both after tax and before tax have fallen by 15 percent and 6 percent respectively while mark-up and operating expenses climbed up 90 percent and 15.8 percent respectively during the first half of year 2019 as compared to same period last year, the bank’s half yearly accounts indicated.
Where the bank’s interest income grew by 56 percent the expenses also grew abnormally high by 90 percent dismantling the impact of the mega increase in the interest income.
ABL report claimed that the operating cost has witnessed an increase due to significant currency devaluation, higher compliance related regulatory charges, aforementioned network expansion, continuous augmentation of technology infrastructure and above all incurring additional expense of Rs 469 million on account of deposit protection charge levied effective from third quarter 2018.
During the period under review ABL also offered voluntary lump sum settlement against pension and commutation to in-service management grade eligible employees attaining superannuation on or after 1st January 2020, the bank report said.
Voluntary exercise of this option led to an additional charge of Rs. 130 million; excluding deposit protection and voluntary pension costs the increase in operating expenses comes down to 10.4%. During the period under review, ABL adopted the International Financial Reporting Standard IFRS 16 – “Leases”, which has introduced the concept of recognizing right of use (RoU) assets and corresponding lease liabilities on the Balance Sheet of the lessee, the report added.
Resultantly, implicit interest expense amortized on lease liabilities led to an additional charge of Rs. 486 million; thereby impacting Your Bank’s NII. Whereas, reversal of rental expense netted off against incremental depreciation charged on RoU assets led to a net decline of Rs. 77 million in the operating expenses, the report said.
ABL’s profit before provisions during the period under review stood at Rs. 10,810 million. However, barring the aforementioned net additional impact of Rs. 409 million booked under IFRS-16, deposit protection cost charge of Rs. 469 million and voluntary lump sum settlement against pension of Rs. 130 million, business as usual profit before provisions increases to Rs. 11,818 million compared to Rs 10,790 million earned in the comparative period; representing a growth of 9.5%, the report said
Proactive monitoring and recovery efforts led to a net provision reversal against non-performing loans (NPL’s) and investments aggregating to Rs. 289 million for the period under review, it said adding that no FSV benefit has been taken while determining the provision against non-performing advances as allowed under guidelines of the State Bank of Pakistan, the report said.
Profit after current years’ taxation stood at Rs. 6,921 million. Incremental super tax levy for the tax year 2018, led to an additional charge of Rs. 835 million which was booked in the Q1 2019. Resultantly, despite the aforementioned significant challenges, ABL posted a stable profit after tax of Rs. 6,086 million during the period under review against the profit of Rs 7,143 million during the same period last year, the bank report highlighted.
In view of the above developments, EPS of ABL stood at Rs. 5.31 per share during the period against the EPS of 6.24 last year, report mentioned.
Banking sector experts say the bank must do something needful to curtail the abnormally high mark-up and operating expenses which are eating at the profit depriving the shareholders of their due share in the profit.