Allied Bank Limited (ABL) reported a significant dip in profitability for the first quarter of 2025, with its net profit after taxation falling by 26.97% year-on-year. For the quarter ended March 31, 2025, ABL posted earnings of Rs8.48 billion, down from Rs11.61 billion in the same period last year. This translates into an earnings per share (EPS) of Rs7, compared to Rs10 in Q1 2024.
Despite the earnings drop, the bank announced an interim cash dividend of Rs4 per share, representing a payout of 40% of the share’s face value, signaling continued commitment to shareholder returns.
The decline in profitability was largely attributed to a fall in total income, which dropped by 7.42% to Rs33.25 billion from Rs35.92 billion a year earlier. A major contributor to this dip was a 12.85% decline in net mark-up/interest income, which fell to Rs25.4 billion. This was driven by a 24% decrease in mark-up/return/interest earned, which could reflect changes in interest rates, asset yields, or lower loan disbursements, while mark-up expenses were down nearly 29%.
However, the non-mark-up income segment offered some relief, rising 16% year-on-year to Rs7.85 billion. This increase was fueled by a 36.79% surge in foreign exchange income, indicating higher trading activity or favorable currency fluctuations. Gains on securities also more than doubled, climbing 146% to Rs744.93 million, suggesting improved market positioning or successful liquidation of investment portfolios. Fee and commission income also posted a healthy growth of nearly 11%, likely supported by increased transaction volumes or digital banking usage.
On the cost side, operating expenses rose sharply by 17.38% to Rs15.34 billion, which significantly added to the pressure on earnings. The increase is indicative of rising administrative costs, technology investments, or inflationary pressures. However, other cost heads, including the workers’ welfare fund and other charges, saw declines of 21.87% and 38.27% respectively, partially offsetting the overall expense hike.
The bank’s share of profit from associates also fell significantly by 41.65%, further weighing on the bottom line. In terms of credit risk, ABL recorded net credit loss allowances and write-offs of Rs134.79 million, slightly lower than the Rs162.75 million recorded in the same period last year.
As a result of these mixed signals across revenue and cost lines, profit before taxation came in at Rs17.71 billion, down 21.62% from Rs22.6 billion in the previous year. Taxation for the quarter stood at Rs9.23 billion, a 15.97% decrease from Rs10.99 billion in Q1 2024, reflecting the lower pre-tax earnings.
The bank’s financial performance in the first quarter of 2025 paints a picture of a challenging operating environment, marked by a squeeze on interest-based income and a surge in expenses. However, the resilience shown in non-mark-up income, especially gains from securities and forex operations, reflects ABL’s strategic diversification of income streams.
Looking ahead, Allied Bank’s ability to manage costs, maintain asset quality, and enhance fee-based income will be critical to navigating what appears to be a tougher earnings cycle in 2025.