PACRA Maintains the Entity Ratings of Bank AL Habib Limited

The ratings of the Bank reflect its enduring and sustained emphasis on reinvigorating its relative positioning in the peer universe. While the competitive landscape is becoming increasingly intensified, the Bank, under its able leadership, is actively taking measurable steps to remain competitive and, indeed, improve its positioning. Bank AL Habib has been portraying a history of stable and steady growth for more than a quarter of a century. The Bank continued with its strategy for outreach expansion - adding significant branches every quarter to enhance geographical concentration. The rating reflects the Bank's improved performance, good asset quality, strengthened financial profile, and healthy liquidity. At end-Dec23, the Bank’s deposit base posted a growth of 23% to stand at PKR 1,934bln (end-Dec22: PKR 1,568bln). The strength of the Bank is reflected in the high proportion of retail deposits in the total. Hence, concentration is low along with reduced risk. The gross advances of the Bank increased to stand at PKR 896bln (end-Dec22: PKR 831bln). Subsequently, the advance share of the bank increased to 7.2% (end-Dec22: 6.8%) making it one of the leading players in the industry. The infection ratio recorded a marginal uptick, still one of the lowest in the industry is a demonstration of the Bank's strength. During CY23, the Profit After Tax of the Bank surged by 106% to stand at PKR 35bln (CY22: PKR 17bln) attributable to enhanced NIMR clocking in at PKR 124bln (CY22: PKR 77bln). The CAR of the Bank reflected an improvement to 15.8% (end-Dec22: 14.7%) owing to healthy profitability. The strengthening of CAR will supplement the growth cushion of the Bank. Trade finance is the hallmark of the Bank ensuring a continuous revenue stream. The rating draws comfort from the business acumen of the sponsor, experienced management team, prudent risk management policies, and deep-rooted relationship with customers-borrowers as well as depositors. CY23 remained a challenging year for the economy inclusive of a drop in exchange reserves, currency devaluation, and peak inflation. To combat inflation and curb aggregate demand, the Central Bank maintained a tight monetary policy stance. Despite these challenges, CY23 was a remarkably successful year for the banking industry. The sector outperformed historical statistics, with two-thirds of net markup income coming from investments in government securities and the remainder from advances. Looking ahead, with the expected monetary rate cut, banks are likely to sustain some dilution in profitability by CY24.
The rating is dependent on the Bank's sustained risk profile. In the wake of heightened competition, profitable growth is a challenge while retaining the relative positioning in the industry. The Bank is enhancing its footprints in the broad financial spectrum, which is essential to meet customers' needs. Digital transformation is very important. BAHL is also into the acquirer business. The equity base of the Bank and CAR is satisfactory and may continually be enhanced.

About the Entity
BAHL, incorporated in Oct 1991, operates with a network of 1,113 branches/sub-branches, including 201 Islamic Banking branches at end-Dec23. The sponsors of BAHL are members of the Habib Family – one of the oldest and most distinguished names in Pakistan’s banking sector. BAHL’s nine-member BoD includes representatives of the Habib Family and independent members. Mr. Mansoor Ali Khan, the Bank’s CEO, has been associated with the Bank for more than 28 years. He is backed by a team of experienced professionals, most of whom have a long association with the Bank.