Bank Alfalah Posts Reduced Profits but Increases Payout Amidst Tax Changes

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Karachi: Bank Alfalah Limited (BAFL) announced its fourth-quarter financial results for the year 2024, revealing a profit of PkR4.7 billion, which marks a decrease of 49% compared to the previous year and a 64% drop from the previous quarter. Despite the profit decline, the bank declared a cash payout of PkR2.5 per share, raising the total payout for the year to PkR8.5 per share.

According to a statement by AKD Securities Limited, the bank’s net interest income fell to PkR31.6 billion in the fourth quarter, reflecting a 10% year-on-year and a 6% quarter-on-quarter decrease. This was primarily due to a drop in mark-up earned as secondary market yields declined, surpassing the reduction in mark-up expenses.

The bank’s mark-up earned dropped by 5% year-on-year and 9% quarter-on-quarter to PkR119.8 billion, affected by lower yields on investments and advances. Consequently, the bank’s net interest margins decreased to 4.5% from 5.4% the previous year.

Non-interest income rose to PkR11.7 billion, up from PkR9.5 billion in the same quarter last year. The increase was attributed to higher foreign exchange income and gains on securities. However, on a sequential basis, non-interest income declined by 9% due to lower gains on securities.

Provisioning expenses significantly decreased to PkR103 million, compared to PkR298 million in the same quarter last year. Non-markup expenses rose to PkR26.6 billion, influenced by inflationary pressures and increased staff costs.

Effective tax rates for the quarter increased to 67.0%, following a government amendment that raised tax rates for banks by 5% for the current year. The government of Pakistan has also announced future tax rate increases for the banking sector while abolishing the Advances to Deposit Ratio based tax starting in 2025.

In light of these developments, the bank increased its payout to PkR2.5 per share, representing a payout ratio of 84% for the final quarter, despite the decline in profitability. AKD Securities maintains a ‘BUY’ stance on BAFL with a target price of PkR123 per share by December 2025 and a dividend yield of 9% over the same period.

The post Bank Alfalah Posts Reduced Profits but Increases Payout Amidst Tax Changes appeared first on Pakistan Business News.