Analyst
Muhammad Noor Ul Haq
noorulhaq@pacra.com
+92-42-35869504
www.pacra.com
Applicable Criteria
Related Research
PACRA Maintains Entity Ratings of Faysal Bank Limited
Rating Type | Entity | |
Current (27-Dec-19 ) |
Previous (27-Jun-19 ) |
|
Action | Maintain | Maintain |
Long Term | AA | AA |
Short Term | A1+ | A1+ |
Outlook | Stable | Stable |
Rating Watch | - | - |
Faysal Bank Limited (FABL) continued its focus on growth while maintaining its relative positioning among peer banks. The bank has an enduring emphasis on CASA deposits, prudent deployment of assets for better yields and carefully planned loan book growth. The bank has a continued focus on operational efficiency and despite an increase in its branch network, the bank was able to keep costs under control. These initiatives have supported the bank’s profitability and provided a cushion against risk absorption capacity. The management is cognizant of dynamic competition in the industry and is taking steps to strengthen FABL's positioning amongst medium-sized banks operating in Pakistan. FABL's conversion into Islamic banking is a medium-term plan, which is being rolled out as envisaged. The banks’ capital adequacy has seen substantial improvement, gradually over the years. Meanwhile, the ratings recognize FABL's association with a foreign business group (Dar Al Maal Al-Islami Trust). There was deterioration in the asset quality as FABL booked PKR 3.6bln of NPLs, it must be sustained. FABL remains a highly capitalized commercial bank with a common equity tier 1 (CET1) ratio of 16.5% as at end-Sep19.
The ratings are dependent on the Bank's ability to sustain improvement in its financial profile. This is important since most peer banks have gained in terms of their size and profitability matrix in recent years. Any material weakening in asset quality, in turn, putting pressure on the Bank's profitability and risk absorption capacity may have negative implications for the ratings.
About
the Entity
FABL, operating with a network of 487 branches, holds ~3.0% share in total banking deposits at end-Sep19. Bahrain based IB Bank B.S.C (Closed) is the parent company of the Bank holding directly and indirectly 66.78% of FABLs shareholding. Ithmaar Holding B.S.C and its subsidiaries are engaged in a wide range of financial services including retail, commercial, investment banking, private banking, takaful and real estate development.
The ten-member BoD, including the Chairman, comprises a mix of experienced bankers and businessmen having domestic and international experience. Mr Yousaf Hussain, the CEO since May 2017, is an experienced banker with over 25 years of experience primarily with ABN AMRO and the last 11 years with Faysal Bank and is supported by an experienced and qualified team.