PACRA Maintains Rating of Askari Bank Limited | TFC VI (Additional Tier I) | July-18

Askari Bank has an impeccable ownership structure. The rating of the bank incorporates the same. The bank has a very strong brand image, flanked by its affiliation with one of the strongest conglomerates, Fauji Group. This represents the strength of the bank. During 9MCY23, net markup income increased to PKR 40.5bln (9MCY22: PKR 29bln) where the mix is sizably tilted towards markup earned from investments. The fee and commission income has a major share of non-mark-up income followed by foreign exchange income. The spread of the bank inched up to 4.4% (9MCY22: 3.4%). Despite an increase in provisioning expenses to PKR 690mln (9MCY22: PKR 180.7mln), the bank’s net profit increased to PKR 14.6bln (9MCY22: PKR 10.7bln). At end-Sept23, the bank grew its deposit base by 12% to stand at PKR 1,275bln (end-Dec22: PKR 1,143bln) - where deposits remained tilted towards saving accounts. Askari Bank has shown a stable growth rate over the years; share in terms of deposits clocking in at 5.1% (end-Dec22: 5.1%). The investment book of the bank inclined to PKR 1,042bln (end-Dec22: PKR 763bln), majorly tilted toward sovereign debt securities. The Bank's CAR inclined to 17.3% (end-Dec22: 15.9%) where Tier I capital concentration stands at 15.4% (end-Dec22: 13.7%), reflecting a sizable cushion for growth and also providing comfort to the currently assigned debt instrument rating.
The ratings are dependent upon the sustainability of the bank's relative positioning. Prudent management of funding costs remains vital, going forward. Meanwhile, holding the asset quality is a prerequisite.

About the Entity
Askari Bank Limited, incorporated in 1991, operates with a network of 609 branches as at end-Sept23. Fauji Consortium is the key sponsor (71.91%) stake. The remaining (28.09%) shareholding is widely spread among financial institutions and the general public. Currently, overall control of the Bank vests in the eleven-member Board of Directors (BoD) including the President and CEO. Five of the board members are Fauji Foundation nominees; four are independent members, while one represents NIT. Mr. Atif Riaz Bokhari is the President and CEO of Askari Bank Limited. He is a seasoned banker with rich industry experience spanning over three decades. He has extensive expertise, both local and international in the financial services industry.

About the Instrument
Askari Bank issued TFC VI (Additional Tier I) of PKR 6bln in Jul-18 to contribute towards AKBL’s Tier I capital for complying with the CAR requirement. The TFC is an Over the Counter (OTC), listed, unsecured, subordinated, perpetual, and non-cumulative instrument. The profit rate is 6MK+1.5% and is being paid semi-annually in arrears on the outstanding principal amount. Neither profit nor principle will be payable in respect of TFC if such payment results in a shortfall in the bank’s MCR or CAR. The bank may call the TFCs, with prior approval of SBP, after five years from the date of issue. The TFCs shall, if directed by the SBP, be fully and permanently converted into ordinary shares and/or have them immediately written off (partially or in full) upon the PONV Trigger Event. The AKBL has paid the profit payment of Tier-I TFC due on July 03, 2023.