Something strange is happening over at Bank Alfalah’s brokerage house. Just put their financial results into context and it becomes clear.

In 2021, the brokerage house made a profit of Rs 7.4 crores. By all indications, this was a company that was healthy and making money. Then came 2022. This was the year when the economy started overheating, inflation was through the roof, political instability was at its peak, a deal with the IMF was falling through, and a new government had come to power in controversial circumstances. Naturally, the stock market dipped. As a result, Alfalah’s brokerage house posted a loss of Rs 1.2 crores. By the standards and circumstances, this was a crisis avoided.

And then comes 2023. In June last year Pakistan successfully concluded talks with the IMF and the stock market surged off the back of the news that default had been averted. Trading floors heated up and daily trade volumes reached as high as 818 million trades. The markets had gained much awaited momentum, and brokerage houses were set to clean house. Leading brokerage houses like AKD Securities, Arif Habib and Sherman Securities posted profits of Rs 90.3 crores, Rs 97.5 crores and Rs 57.3 crores respectively.

But somehow Bank Alfalah CLSA failed to cash in on the year that was 2023. Not only did they not post a profit, they ended up making a massive loss of more than Rs 1 billion. A loss so huge that its equity went from being Rs 34.1 crores to negative equity of Rs 78.5 crores. The brokerage house could not sustain the losses and needed additional liquidity to be injected in order to make its equity positive again. In the middle of all this, the company’s CEO Atif Khan also left quietly after a hush-hush resignation.

In the wake of the massive loss, Bank Alfalah, the parent company of the brokerage house, had to scramble to put out the fire. Bank Alfalah CLSA was well in the red and the bank had to pump in a further Rs 1.2 billion in the company. Before this, Bank Alfalah’s share in the brokerage house was 62.5% and now it has gone up to 90.6%. The injection of capital was a simple instrument to save the brokerage house. But how were the losses posted? Sources have told Profit some of the brokerage’s senior management made some bad calls and then tried to hide some of the bigger losses they made. The possibilities within this are two-fold. The first is that the senior management trusted the wrong people. The other is that they knowingly shifted things around, and the company is now having to regroup.

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The post The CEO of Alfalah’s brokerage house has resigned after a billion rupee loss on his watch. Was it simple mismanagement or something more? appeared first on Profit by Pakistan Today.