Bank Alfalah Reports Significant Drop in Third Quarter Earnings

Karachi: Bank Alfalah reported a 52% year-on-year decline in its earnings per share for the third quarter of 2025, falling short of industry expectations. The bank’s consolidated earnings were recorded at Rs6.3 billion, with an EPS of Rs4.0, marking a 21% drop from the previous quarter. The earnings for the first nine months of 2025 total Rs21.4 billion, down 39% from the same period last year.

The lower-than-expected results were attributed to a significant rise in operating costs, which increased by 48% year-on-year and 4% quarter-on-quarter. These costs were largely due to expenses related to remittances, as the bank sought to maintain and expand its market share. Bank Alfalah’s market share in remittances rose from 13% in June 2025 to over 15% by September 2025.

The cost-to-income ratio for the quarter climbed to 67%, up from 45% in the same quarter of the previous year. For the first nine months of 2025, the ratio reached 64%, compared to 48% in 2024. However, there is an expectation of improvement in this ratio by December 2025, as remittance-related costs begin to decrease.

Non-interest income saw a decline, dropping 14% year-on-year and 23% quarter-on-quarter to Rs11.5 billion. The bank recorded a gain on securities of Rs2 billion, representing declines of 67% year-on-year and 72% quarter-on-quarter, while foreign exchange income increased by 48% year-on-year to Rs3.6 billion.

Net Interest Income for the third quarter of 2025 rose by 4% year-on-year, reaching Rs34 billion. On the balance sheet, deposits contracted by 5% quarter-on-quarter to Rs2.2 trillion, although they showed a marginal year-on-year increase of 1.4%. The proportion of current account deposits improved slightly, reaching 43% by September 2025.

Bank Alfalah recorded a provision expense of Rs1 billion for the third quarter, taking the total provisions for the first nine months to Rs2 billion. The effective tax rate for the bank was 54% in the third quarter, compared to 57% in the previous quarter and 51% in the third quarter of the previous year.

Despite the earnings decline, Bank Alfalah announced a dividend of Rs2.5 per share, aligning with expectations. This results in a total dividend per share of Rs7.5 for the first nine months of 2025. Analysts maintain a buy stance on Bank Alfalah, with the stock trading at a 2025 estimated price-to-earnings ratio of 6.2, price-to-book value ratio of 0.9, and a dividend yield of 9%.