PACRA Maintains the Rating of Bank AL Habib Limited | Tier-II | TFC X | PKR 7bln | Dec'22

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 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 gross advances 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.
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 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.

About the Instrument
The Bank issued unsecured, rated, listed and subordinated, up to ten years tenured TFCs with an issue size of PKR 7bln. The instrument bears a call option, exercisable (either partially or in full) on or after five years of the issue date. Neither profit nor principal will be payable if such payment results in a shortfall in the Bank’s Minimum Capital Requirement (MCR) or Capital Adequacy Ratio (CAR) or Leverage Ratio (LR). The Issue contributes toward the Bank’s Tier II Capital for CAR requirements and bears a floating rate of 6MK+1.35% p.a. The instrument redeems 0.02% of the issue amount semi-annually during first 9 years and the remaining amount in two equal semi-annual installments in the 10th year. The instrument is subordinated as to payment of principal and profit to all other indebtedness of the Bank but superior to outstanding Additional Tier 1 issues and ordinary shares.