On an unconsolidated basis, Bank Alfalah Limited (BAFL) has announced NPAT of PkR1.11bn (fully diluted EPS: PkR0.82) in 1HCY09 against NPAT of PkR1.82bn (EPS: PkR1.35) in 1HCY08, a decline of 39%YoY. Actual 1HCY09 earnings are 7% greater than our forecasted NPAT of PkR1.03bn (EPS: PkR0.77) in 1HCY09. On a sequential basis, earnings are up 47%QoQ in 2QCY09. Alongside the result, BAFL’s BoD has approved issuance of TFC up to PkR5bn. This is likely to boost the bank’s CAR, in our view, which would support future growth.

Key highlights of 1HCY09 results include 1) flat net interest income, 2) 3x increase in total provisions, 3) flat non-interest income, 4) indications of cost control (up just 7%YoY) and 5) an effective tax rate of just 21% (10% in 2QCY09). On a sequential basis in 2QCY09, net interest income has declined by 8%QoQ, total provisions are up 60%QoQ and non-interest income is down 5%QoQ (decline in fee income diluted by exceptional forex income and capital gains, up 387%QoQ and 11%QoQ, respectively).

BAFL trades at a forward CY09F Tier-I P/B multiple of 0.76x and a CY09F PER of 9.9x. At present, we have a Buy stance on BAFL based on our target price of PkR13.9/share. However, we will be looking to revise our investment case post issuance of detailed 1HCY09 results.