Allied Bank Limited (AKBL) reported a profit after tax of Rs.6.6 billion (EPS: Rs.4.54) for 1QCY26, down 8 percent year-on-year (YoY) but up 37 percent quarter-on-quarter (QoQ). Alongside the results, the bank announced a dividend of Rs.2 per share, translating into a payout ratio of 44 percent for the quarter. The quarterly performance was mainly supported by stronger non-markup income, stable net interest income (NII), and provisioning reversals.

Net interest income remained broadly stable at Rs.22 billion, up 1 percent YoY but down 2 percent QoQ. Interest earned declined 2 percent YoY to Rs.75 billion, while interest expenses fell 3 percent YoY to Rs.53 billion.

Non-markup income, which includes earnings from fees, foreign exchange operations, and capital gains rather than lending-based interest income, showed strong growth during the quarter. Fee income rose to Rs.2.2 billion, up 25 percent YoY, capital gains increased sharply to Rs.1.9 billion, up 135 percent YoY, while foreign exchange income reached Rs.837 million, up 18 percent YoY. As a result, total non-markup income increased 45 percent YoY to Rs.5.4 billion.

The bank also recorded a provisioning reversal of Rs.82 million in 1QCY26 compared to a provisioning charge of Rs.256 million in the same period last year. Operating expenses increased 37 percent YoY to Rs.13.9 billion, pushing the cost-to-income ratio to 50 percent compared with 39 percent in 1QCY25.

The effective tax rate remained stable at 52 percent for the quarter.

On the balance sheet side, deposits rose to Rs.1.7 trillion, up 22 percent YoY. Advances increased 9 percent YoY to Rs.601 million, while investments grew 34 percent YoY to Rs.2.2 trillion. This resulted in an ADR of 35.6 percent and an IDR of 130.5 percent.

The stock is currently trading at a price-to-book ratio of 0.9x, with a dividend yield of 6.2 percent for CY26e based on the last day closing price.