PACRA Upgrades the Entity Ratings of Bank Alfalah Limited

Bank Alfalah Limited (BAFL) has portrayed an impressive growth strategy ever since its inception around three decades ago. First attaining the position of a mid-sized bank, it is now in the league of large banks. With a PKR 2,085bln deposit base at end-Dec23, it boasted a competitive system share in customer deposits. The bank was vying for the highest rating ever since it achieved more than a trillion deposit base, among other parameters. The sustainability of multiple factors has been demonstrated and the assigned rating reflects the same fact. The industry landscape is truly intensive and the management will have to take full cognizance of it to remain relevant and competitive in the new peer ratings. The ownership and governance of the bank are considered paramount support to the assigned ratings. The rating takes into account the robust management quality, prudent risk management policies, increasing penetration through digital channels, growing market share, diverse product suite, and successful execution of its strategic plans, as observed over a number of years. As a customer-centric bank, BAFL has a strong nationwide presence, enabling it to reach out to its target audience. It has a presence in 225+ cities, with 1,000+ branches including 350+ Islamic branches. In addition to trade, the bank achieved a remarkable market share of 14.2% in remittances. This provides support to the alternative revenue stream, while also enabling high deposit growth. The digital presence of the bank is one of the strongest. The bank has also opened a digital lifestyle branch in Pakistan, that offers digital banking and lifestyle solutions under one roof. The bank has also started opening digital sales and services centers. The digital throughput almost doubled in the last year. AlfaMall is Pakistan’s first banking-led eCommerce marketplace, which offers among other product offerings. It has more than 730k users, based on 30 days of activity. The Bank has strategically positioned itself in the lending market, capitalizing on its unique business proposition. The gross performing advances increased to PKR 740bln, whereas the infection ratio clocked in at 4.8%. Nevertheless, the loan loss coverage ratio is over 112%, lending comfort against total delinquency. The market share of the bank is approximately 5.9% in advances and 8.5% in trade. During CY23, the net profitability of the Bank notably doubled to PKR 36bln. The cost-to-income ratio improved to 41.8% as against 50% last year. At end-Dec23, the CAR improved to 16.7%. The ratings, on an overall basis, highlight the bank's improved performance, strong financial profile, overall good asset quality, and healthy liquidity. The bank also has a presence in various dimensions of the financial spectrum, namely asset management, general insurance, and brokerage. Going forward, the bank intends to augment its domestic footprint, with more emphasis on aiding SMEs in their growth, boosting trade volumes, penetrating cash management, supply chain financing, and home remittances.
The ratings are dependent on the continued compliance with ‘AAA’ parameters. Any weakening in these parameters will be considered negative.

About the Entity
BAFL was established in 1992. The majority ownership of the bank lies with the Abu Dhabi Group (sponsors of the Bank based in Abu Dhabi, UAE), with a stake of 56.16%. Other shareholders include Mutual Funds, NBFCs, FIs, DFIs, individuals (43.70%), and executives (0.14%). The Abu Dhabi Group comprises prominent members of the UAE's ruling family and leading businessmen with global investments. BAFL's board consists of eight members, including the President/CEO and seven non-executive directors, of which four represent the Abu Dhabi Group, and three are independent. Mr. Atif Bajwa, Bank's President & CEO, brings 40 years of executive leadership experience in the banking sector.