Bank Alfalah Limited reported a 23.5% increase in profit for the nine-month period ended September 30, 2024, yet the growth comes at a time when broader economic challenges loom large. Despite the rise in profit, which amounted to PKR 33.643 billion, the sustainability of such growth remains questionable, given the fragile macroeconomic environment. Earnings Per Share (EPS) increased to PKR 21.33, but it is unclear how long these numbers can hold up if market volatility continues.
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The Bank’s profit before tax, reported at PKR 66.482 billion, was largely attributed to a sharp 76.4% rise in Non-Funded Income. Some analysts suggest that this heavy reliance on fee-based income, rather than core banking operations, could signal a potential vulnerability if market conditions change or if fee structures face regulatory scrutiny.
Although the Board declared a PKR 2.00 per share dividend (20%) for the third quarter, bringing the total dividend for the year to PKR 6.00 per share, this distribution may put further pressure on liquidity amid growing economic headwinds.
Deposits stood at PKR 2.136 trillion, reflecting a 17.3% YoY increase. However, with rising inflation and tighter monetary policies, sustaining deposit growth at this rate may prove challenging. While the CA and CASA ratios of 40.1% and 72.4% appear strong, analysts worry about potential pressures on the Bank’s asset quality.
The Bank’s gross advances reached PKR 903.913 billion, with a marginal improvement in the infection ratio to 4.6%, down from 5.4% in the same period last year. However, concerns remain about the broader credit environment, which could lead to rising defaults in the future.
Although Bank Alfalah’s Capital Adequacy Ratio (CAR) of 19.04% exceeds the regulatory minimum, the sector-wide risks and economic downturn may put this cushion under stress if conditions worsen.
Despite earning awards and recognition for operational excellence, some experts argue that such accolades do little to offset the structural vulnerabilities the Bank faces as it navigates a turbulent financial landscape. Questions remain about whether the Bank’s focus on digital transformation and customer experience can withstand the pressures of an unpredictable market.
Looking ahead, Bank Alfalah faces significant challenges in sustaining profitability and value creation for its shareholders, given the uncertainty in both local and global economic conditions. It remains to be seen if the Bank can maintain its resilience or if it will falter under increasing pressure.
