Allied Bank Limited (AKBL), at the beginning of the new year (2026) has posted a profit after tax during the first calendar quarter 2026 of Rupees 6.6 Billion, which results in an earnings per share (EPS) of Rupees 4.54. This decrease of 8% from the prior year’s first quarter result, but a strong, significantly, 37% increase from the immediately preceding quarter indicates that AKBL has started to regain its momentum following some pressure on earnings.
Investors are encouraged by the Dividend Declaration
In the same press release announcing its quarterly financial results, Allied Bank announced that they will be distributing Rs2/share in cash dividends. This dividend has resulted in a payout ratio of 44% for the quarter and generally speaking is something both analysts and income oriented investors would view as positive. With interest rates continuing to be high and the market for bank stocks being increasingly less attractive, an ongoing dividend payment reassures investors of the financial discipline of the bank’s management team and their belief in the future prospects of the bank.
The Recovery of Income through Non-Markup Sources
The first quarter of 2026 saw an increase in earnings largely due to increased non-mark-up sources. Non-mark-up income at AKBL increased 45%, year over year, to Rs 5.4 billion, according to information provided by Arif Habib Limited. The revenue increase came through various sources and supported the bank’s efforts to diversify and reduce reliance upon traditional lending products.
Revenue from fees increased by 25% compared to the previous year to reach Rs 2.2 billion. This was due to increased volume of transactions and the provision of additional services by the bank. The most notable increase occurred in the area of capital gains with an increase of 135% from last year, reaching Rs 1.9 billion. Additionally, foreign currency exchange revenues increased by 18% compared to last year, growing to Rs 837 million as a result of improved trading activities and additional currency-related transactions.
Core Banking Swings are Balanced!
The income from interest was relatively static. Interest received dropped 2% for the year to date at 75 billion rupees (Rs75 billion); interest paid to banks also declined (year to date) by 3% (Rs53 billion). This modest decrease as we move further along through time illustrates just how the bank continues evolving through its lending strategy, which continues to operate within the framework of monetary policy issued by the State Bank of Pakistan.
During Quarter 3 of this fiscal year, the bank renewed its loan provisions by Rs 82 million compared with Quarter 3 of last year when they increased their provision for bad debts by Rs 256 million; this indicates improved management of credit risk through improved quality to their portfolio overall.
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Rise in Operating Expenses
Allied Bank’s Q1 2026 results highlighted the most difficult area as operating expenses. The expense was Rs13.9b, an increase of 37% year-on-year resulting in a cost-to-income ratio of 50% compared to 39% one year before. Costs are a result of a combination of inflationary pressure, employee expenses and continued investment in branches and digital channel growth. Managing this cost growth will continue to be a major focus of the bank during the upcoming quarters.
The overall growth of Allied Bank’s balance sheet in Q1 mirrored increases across all categories. Deposits grew to Rs. 1.7 trillion (22% YoY), advances were up to Rs. 601 billion (9% YoY) and investments continued to lead the way with a 34% YoY increase reached Rs. 2.2 trillion.
This ratio yielded a 35.6% advance to deposit ratio and a 130.5% investment to deposit ratio, affirming the continued preference for investing in security rather than lending directly as economic conditions continue to rise.
Valuation Remains Appealing
The stock of Allied Bank currently has a discounted value based on the price to book capital ratio of 0.90x. Quality investors seeking reliable cash flow will find the expected dividend yield of 6.20% for the entire 2026 calendar year to be a favourable reason to invest. Also, with management’s focus on maintaining cost control measures and growing non-markup income, the Q1 2026 results provide Allied with a solid base on which to build for the remainder of the year.
