Bank Alfalah Poised for 60%+ Capital Upside, Analysts Say

Karachi, Bank Alfalah (BAFL), one of the prominent financial institutions in the region, is identified as a valuable investment opportunity with analysts predicting over 60% capital upside. This projection comes in light of the bank’s expected average recurring Tier-I return on equity (ROE) of 20% for the next five years. Current valuations of BAFL at a price-to-earnings (P/E) ratio below 1.5 times and a price-to-book (P/B) ratio of 0.45 times are seen as not reflecting the bank’s earnings potential.

According to JS Research, the forecast for Bank Alfalah’s financial performance includes the anticipated effects of a policy rate cut to 12% by mid-calendar year 2025, which is expected to normalize the bank’s ROE to 20%. This is despite the bank’s asset allocation being inclined towards variable-priced assets, which could fluctuate with interest rates.

In a corporate briefing, Bank Alfalah’s management outlined its expansion plans, targeting a network of 1,000 branches by the end of calendar year 2023. This expansion will include the opening of 58 new branches in the fourth quarter of 2023 and an additional 160 branches in 2024. Furthermore, the bank plans to increase the proportion of Islamic branches within its portfolio.

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