October 23, 2025 (MLN): Bank Alfalah Limited (PSX: BAFL) has reported its financial results for the nine months ended September 30, 2025, posting a net profit of Rs21.40bn, down 39.22% from Rs35.21bn in the same period last year (SPLY).

The basic and diluted earnings per share (EPS) stood at Rs13.56, compared to Rs22.32 in SPLY, showing the decline in profitability.

Despite the earnings decline, the bank's board of directors disclosed a third interim cash dividend of Rs2.5 per share (25%) for the quarter ended September 30, 2025.

This brings the cumulative dividend payout to 75% (Rs7.5 per share) for the nine-month period, having already distributed two interim dividends of 25% each in the previous quarters.

The bank's net mark-up/interest income increased modestly by 4.55% to Rs101.51bn from Rs97.09bn, as mark-up/return earned declined 30.82% to Rs270.84bn while mark-up/return expensed fell more sharply by 42.48% to Rs169.33bn, demonstrating improved liability management despite lower asset yields in the declining interest rate environment.

Fee and commission income declined 14.41% to Rs11.96bn from Rs13.97bn, indicating reduced transaction-based revenue amid softer economic activity.

Dividend income dropped significantly by 79.47% to Rs2.02bn from Rs9.12bn last year, suggesting lower returns from equity investments and reduced market opportunities.

Foreign exchange income grew strongly by 14.98% to Rs8.94bn from Rs7.77bn, benefiting from increased forex trading activity and volatility in currency markets.

However, income from derivatives plunged 37.19% to Rs933.80m from Rs1.49bn, showing reduced derivative trading gains.

Gain on securities declined 17.00% to Rs10.06bn from Rs12.12bn in SPLY, impacted by challenging market conditions.

The share of profit from associates increased 20.09% to Rs1.22bn from Rs1.02bn, showing improved performance from associated entities.

Other income surged remarkably by 278.45% to Rs939.55m from Rs248.26m, indicating substantial non-core income gains that partially offset weakness in other revenue streams.

Total non-mark-up/interest income stood at Rs36.07bn, up 5.41% from Rs34.22bn. Combined with net mark-up income, total income reached Rs137.57bn, an increase of 4.77% from Rs131.31bn last year, showing resilient top-line growth.

Operating expenses rose 41.80% to Rs86.58bn from Rs61.06bn, reflecting significant inflationary pressures, technology investments, and business expansion costs that weighed heavily on the bank's cost structure.

Workers' welfare fund decreased 20.23% to Rs1.09bn from Rs1.37bn, while other charges declined 93.83% to Rs13.50m from Rs218.82m.

Total non-mark-up/interest expenses increased 39.97% to Rs87.69bn from Rs62.65bn, growing substantially faster than income and compressing operating margins.

Profit before credit loss allowance/provisions declined 27.34% to Rs49.89bn from Rs68.66bn.

The bank recorded net credit loss allowance/provisions and write-offs of Rs1.95bn, a dramatic increase of 834.53% from Rs208.40m in SPLY, indicating heightened credit risk and asset quality concerns in the economic environment.

This substantial increase in provisioning shows a more conservative approach to risk management and anticipation of potential stress in the loan portfolio.

Profit before taxation from continuing operations stood at Rs47.94bn, down 29.97% from Rs68.45bn last year.

The taxation charge decreased 20.39% to Rs26.47bn from Rs33.25bn, resulting in profit after taxation from continuing operations of Rs21.47bn, down 39.01% from Rs35.21bn.

The bank recorded a loss from discontinued operations of Rs75.39m (net of tax) compared to a marginal loss of Rs636 in SPLY, having minimal impact on overall results.

After accounting for discontinued operations, the total comprehensive income settled at Rs21.40bn, representing a 39.21% decline from Rs35.20bn in the same period last year.