Bank Alfalah Targets Deposit Growth Rate Up to 20% in 2024

Staff Report

Bank Alfalah (BAFL) management is targeting a deposit growth rate of 15-20% for 2024, aiming to further increase market share.

Bank Alfalah (BAFL) held its 1Q2024 Corporate Briefing Session, discussing financial performance and future outlook.

In this session, BAFL reported a remarkable 31% year-on-year growth in deposits, reaching Rs2.04 trillion in 1Q2024.

Management is targeting a deposit growth rate of 15-20% for 2024, aiming to further increase market share.

Regarding lending, management intends to maintain a cautious approach, targeting a growth rate of 10-15% in 2024.

Anticipating a policy rate cut of at least 100 basis points at the upcoming monetary policy meeting on June 10, 2024, BAFL expects further cuts in the second half of 2024 contingent upon budgetary measures and IMF conditions under the new program.

In its expansion plans, BAFL aims to add 150 branches in 2024, with a minimum of 100 being Islamic branches.

Management emphasized maintaining a consistent dividend payout policy, though the final payout remains subject to the board’s decision.

Regarding its portfolio composition, 20% of BAFL’s PIBs portfolio consists of fixed-rate securities yielding 14.4%, while the remaining 80% is floating-rate. T-Bills constitute 13% of the total bond portfolio, yielding just over 21%.

BAFL’s intention to acquire Samba Bank aligns with its expansion strategy, driven by Samba Bank’s clean books, strategic branch locations, and ability to meet CAR requirements.

Although BAFL did not record ADR-related tax expenses in 1Q2024, they anticipate reaching the 50% limit by the end of 2024.

Management anticipates pressure on Net Interest Margins (NIMs) in 2024 due to an expected decline in the policy rate. Net Interest Income (NII) witnessed a 12% quarter-on-quarter decline due to increased swap costs and declining market yields.

In 1Q2024, BAFL reported consolidated earnings of Rs9.95 billion (earning per share of Rs6.31), down 8% year-on-year but up 10% quarter-on-quarter. Alongside this, the bank announced a first interim cash dividend of Rs2 per share in 1Q2024.

With the stock currently trading at a 2024E PE ratio of 2.3x and a PBV ratio of 0.5x, we maintain a buy stance on BAFL” analysts said.