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Karachi: Bank Alfalah Limited reported a significant decline in profits for the fourth quarter of 2024, announcing earnings of PkR4.7 billion, or PkR3.0 per share. This represents a year-over-year decrease of 49% and a quarterly drop of 64%. Despite the decline, the bank declared a cash payout of PkR2.5 per share, bringing the total payout for the calendar year to PkR8.5 per share.
According to a statement by AKD Securities Limited, the financial outcomes fell short of expectations due to lower-than-anticipated gains from the sale of securities. However, the cash payout exceeded predictions. The bank’s Net Interest Income (NII) decreased to PkR31.6 billion for the quarter, a decline of 10% year-over-year and 6% quarter-over-quarter. This reduction was attributed to a significant decline in secondary market yields, affecting the mark-up earned.
The bank’s mark-up earned decreased by 5% year-over-year and 9% quarter-over-quarter to PkR119.8 billion, impacted by reduced yields on investments and advances. Consequently, the bank’s Net Interest Margins (NIMs) fell to 4.5% in the fourth quarter of 2024 from 5.4% in the same period last year and 4.8% in the previous quarter.
Non-interest income was recorded at PkR11.7 billion, compared to PkR9.5 billion in the fourth quarter of 2023. The increase was attributed to higher foreign exchange income and gains on securities. However, on a sequential basis, non-interest income dropped by 9% from PkR12.9 billion, primarily due to lower gains on securities.
Provisioning expenses decreased to PkR103 million, compared to PkR298 million in the same quarter last year and PkR439 million in the third quarter of 2024. Non-markup expenses rose to PkR26.6 billion, up 41% year-over-year and 29% quarter-over-quarter, driven by inflationary pressures and increased staff costs.
The effective tax rate for the quarter increased to 67.0%, up from 63.8% and 49.2% in the fourth quarter of 2023 and third quarter of 2024, respectively. This increase followed a 5% hike in effective tax rates for banks for the year.
The Pakistani government has increased the tax rate for banks by 5%, 4%, and 3% for the years 2025, 2026, and 2027 onwards, respectively, through amendments to the Income Tax Ordinance. Additionally, the Advances to Deposit Ratio-based tax will be abolished starting in 2025.
Despite the decline in profitability, Bank Alfalah enhanced its payout to PkR2.5 per share for the final quarter, representing a payout ratio of 84%. AKD Securities Limited maintains a ‘BUY’ stance on Bank Alfalah, 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 Reports Decline in Profits but Boosts Cash Payouts appeared first on Pakistan Business News.