Financial Analysis of Allied Bank Ltd

About the Allied Bank:

Allied Bank Limited was the first bank to be established in Pakistan. It started out in Lahore by the name Australasia Bank before independence in 1942; was renamed Allied Bank of Pakistan Limited in 1974 and then Allied Bank Limited in 2005. In August 2004, because of capital reconstruction, the Bank’s ownership was transferred to a consortium comprising Ibrahim Leasing Limited and Ibrahim Group.

Registered Office

8-Kashmir / Egerton Road,

Lahore - 54000

Pakistan

Website

www.abl.com

Key Financial and Operating data: (year ended Dec 2010)

Total Assets: 449,931,526,000

Net Assets: 35,974,857,000

No. of Ordinary Shares (As of Dec 2010): 782,100,834

No. of Branches: 809

Profit or Loss per Share (Half Year Ended June 2011): Rs 5.85

Market Price per Share (As of 23/9/2011): Rs 60

Credit Rating As of June 2011

Ratings By PACRA

Short Term: A1+

Long Term: AA

Income Analysis:

               

The bank has shown a steady rise in its spread income during the period 2005-10. The bank earned 5-7% spread income on its average deposits outstanding during the period 2005-2010.The gap between net spread income and net income has widened during 2005-10 owing to increased non-interest administrative expenditure and reduced income from non-core banking operations. There exists wide fluctuation in the growth in net income. The bank has history of burning capital in earlier 20s. however, the bank has sustained a healthy income per share recently to the tune of 5-10 Rs per share.

Return and Efficiency:

 The bank returned a healthy profit on its net assets amounting to no less than 25% over the period 2005-2010. It also managed to keep its administrative expenses well below its spread income on its deposits.

Risk, Liquidity and Depth of Banking Operations:

The banks risk profile remained above average over the years 2005-2010. Its ratio of total assets to the net assets remained 15 to 16; which seems to be high. Nonetheless, the bank has started decreasing its leverage otherwise it needs to increase capital. The liquidity of the bank’s asset profile is trending upward, recently, owing to the higher proportion of liquid investments as compared to the ill-liquid loan portfolio. Greater proportion of investment in liquid asset may imply a higher level of illiquidity and risk of loan portfolio. Historically, the bank’s ability and willingness to extend loan was above average, however, its economic capital may not support its growing loan portfolios.

Conclusion:

Overall financial performance of the bank remained satisfactory. The bank needs to improve capital so that it can increase its banking operation i.e. accepting deposits and extending loans.