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Topline Flash Note: Bank Alfalah Limited (BAFL): Conference Call takeaways

• The bank’s deposits have declined by 3.4% QoQ during Mar-2020, which the management attributed to seasonality. The deposits have however grown by 9.8% YoY.
• CASA has increased significantly from 75.9% in Dec-2019 to 79.3% in Mar-2020 as a few term deposits were retired.
• The bank’s investment book saw a major shift, where the bank moved towards high yielding PIBs over the past year. IDR has increased further to 49% in Mar-2020 from 38% in Dec-2019. The PIBs now account for 39% of the total investments. Out of the Rs145bn PIB book, the bank holds floaters worth Rs74bn.
• The loan book has marginally shrunk by 2% QoQ. The management is very mindful of the current economic climate and has adopted a very prudent stance. As a result, the subjective provisioning and downgrades led to increase in provision on loans (Rs866mn).
• On the investment book (equities), 100% impairment was taken resulting in a provision charge of Rs710mn despite the relaxation allowed by the State Bank of Pakistan (SBP).
• Non markup expense increased significantly by 19% YoY driven by 20% YoY increase in OPEX for the quarter. The cost was driven by inflationary pressures, overhang of the new branches opened last year and infrastructure spend (IT and branch up-keep).
• The bank had planned to open an additional 75 branches in 2020 but given the scenario amidst COVID-19 the target is expected to be revisited.
• NIMs compression is expected to be countered by investment income, which the bank feels confident can be sustained for the next two years.
• Fee commission income is expected to remain under pressure due to decline in trade and lower card based transactions.