Bank Alfalah Limited (hereinafter referred to as “BAFL” or “the Bank”) was incorporated as a public limited company in 1992 and is listed on the Pakistan Stock Exchange (PSX). Bank Alfalah Limited has experienced remarkable growth since its establishment, becoming a prominent private commercial bank in Pakistan. It holds a significant position in credit card issuance and acquisition, consumer banking, SME, digital banking, and remittances, and is recognized as one of the major players in Islamic Banking in the country. At CY25, the Bank operated through 1,178 branches (Dec’24: 1,141 branches) and 8 sub-branches (Dec’24: 12 sub-branches). Out of the total branches, 717 were conventional (Dec’24: 707), 450 were Islamic (Dec’24: 423), 10 were overseas (Dec’24: 10), and 1 was an offshore banking unit (same as Dec'24). Bank provides financial solutions to consumers, corporations, institutions, and governments through a broad spectrum of products and services, including corporate and investment banking, consumer banking, retail deposits, commercial, SME, agri-finance, islamic financing and deposits.

BAFL is majority-owned by the Abu Dhabi Group (The Group – sponsors of the Bank based in Abu Dhabi, UAE), with a stake of 55.61%. Other stakeholders include Mutual Funds, NBFCs, FIs, DFIs, individuals (44.28%), and executives (0.11%). The Group has retained the majority shareholding, for the last many years and is expected to remain the same in the foreseeable future. Bank Alfalah Limited, as a holding company, maintains strategic investments in a subsidiary and associates across diverse sectors, including asset management, insurance, foreign exchange, and energy. Alfalah Currency Exchange Limited is the subsidiary of the Bank, while associated companies comprise Alfalah Asset Management Limited, Alfalah Insurance Company Limited, and Sapphire Wind Power Company Limited. The sponsors possess strong financial ability, providing a reliable backstop for BAFL if needed. In parallel, the Bank is actively streamlining its international exposure: the acquirer of Afghanistan operations, Ghazanfar Bank (GB), has completed the due diligence and the binding bid has been received. The negotiations on the definitive agreement are ongoing with GB. Further, the Bank’s shareholders have approved the proposed sale of its Bangladesh operations to Bank Asia Limited, subject to regulatory clearances. Upon completion, these transactions are expected to support the Bank’s strategy of rationalizing international exposure, unlocking capital from non-strategic markets and redeploying it towards core and higher-growth areas.

BAFL's Board consists of nine members, including the President & CEO and eight Non-Executive Directors. Out of the eight Non-Executive Directors, four represent the Abu Dhabi Group, while the remaining three members serve as Independent Directors, and one female Director. The Chairman of the Board of Directors, His Excellency Sheikh Nahayan Mabarak Al Nahayan is a prominent member of the ruling family of Abu Dhabi, United Arab Emirates. Currently, His Excellency is UAE Cabinet Member and Minister of Tolerance and Coexistence. Mr. Abdulla Nasser Hawaileel Al Mansoori is a prominent businessman of Abu Dhabi, UAE. Presently, he is the Chairman of the Board of Al Nasser Holdings and Group Companies which have diversified activities ranging from Oilfield Services, Retailing, Investments, Manufacturing Industries, Real Estate and Food & Beverage. He has served on the Board since 1997. Mr. Abdulla Khalil Al Mutawa is serving in the position of H.E. Sheikh Suroor Bin Mohammad Al Nahyan Private Office Advisor. He has been associated with the Bank for over 27 years. Mr. Khalid Mana Saeed Al Otaiba is associated with His Excellency Dr. Mana Saeed Al Otaiba (Personal Advisor to His Highness, the President of UAE). He has served on the Board since 2003. Dr. Ayesha Khan is an expert in the field of corporate strategy, capital allocation and governance of regulated financial institution. She is currently the CEO and Regional Managing Director at Acumen Pakistan. Dr. Gyorgy Tamas Ladics, CEO of Silverlake Symmetri, has over 30 years of experience in the financial services industry, formulating digital strategies and businesses transformation globally. Mr. Khalid Qurashi, a retired banker, with considerable international banking experience. Presently, he is an independent member of the Board of HBL Bank, UK. Mr. Efstratios Georgios Arapoglou is a consultant with an earlier career in International Capital Markets and Corporate & Investment banking based in London and later in managing, restructuring and advising publicly listed Financial Institutions and Corporates in Southeastern Europe and the Middle East. Presently he is a Chairman of Bank of Cyprus and joined the Board in 2024. To ensure effective and independent oversight of the Bank’s overall operations, the Bank has constituted seven Board committees namely, i) Board Audit Committee, ii) Board Human Resource, Remuneration & Nomination Committee, iii) Board Risk Management Committee, iv) Board Information Technology Committee, v) Board Strategy and Finance Committee, vi) Board Real Estate Committee, and vii) Board Crisis Management Committee. The external auditors of the Bank, A.F Ferguson, and Co., Chartered Accountants, have issued an unqualified audit opinion pertaining to financial statements for CY25.

BAFL has a lean organizational structure that clearly defines responsibilities, authority, and reporting lines with proper monitoring and compliance mechanism. Bank Alfalah’s senior management team brings extensive local and international banking experience. CEO Mr. Atif Aslam Bajwa, has over 41 years of executive leadership experience with a career starting at Citibank in 1982. CFO Ms. Anjum Hai, with over 31 years of experience, is a Fellow Member of ICAP and ACCA. CRO Mr. Faisal Rabbani , has over 35 years of experience and holds an MBA from IBA, Karachi. Bank Alfalah has three main management committees for the purpose of strategic planning and decision-making under the Chairmanship of the CEO; (a) Central Management Committee; (b) Central Credit Committee; and (c) Digital Council. The Bank uses Temenos (T-24) as its core banking software across all branches and head office operations. The Bank’s risk management framework has a well-defined organisational structure for effective management of credit risk, market risk, liquidity risk, operational risk, information security risk, credit concentration risk, environment and social risk. Moreover, the Bank has an independent unit for model risk management and group oversight, and a separate division for credit administration and consumer risk. The Board Risk Management Committee is appointed and authorized by the Board of Directors to assist in the design, regular evaluation, and timely updating of the risk management framework of the Bank, and the Board Information Technology Committee plays a supervisory and advisory role for IT, Information Security and Digital Banking functions within the Bank.

Bank Alfalah ranks among the leading large-sized banks in Pakistan, supported by a diversified business profile, strong digital franchise, and stable funding base. During CY25, the Bank demonstrated resilience despite a declining interest rate environment and elevated operating costs. Total deposits increased by ~16.8% YoY to PKR 2.496trln (Dec’24: PKR 2.136trln), driven by growth in granular and low-cost current account deposits. During 1QCY26, the deposit base remained strong at PKR ~2.471trln, reflecting continued customer confidence and a stable funding profile. Gross advances remained stable at PKR 1.153trln during CY25, while during 1QCY26, advances moderated to PKR 1.076trln due to seasonal adjustments and balance sheet optimization. The Bank continued to strategically diversify its lending mix toward Consumer, SME, Commercial, and Agriculture segments. During CY25, BAFL’s total revenue increased by ~7.1% to PKR 183.4bln (CY24: PKR 171.2bln), while the Bank maintained stable earnings momentum during 1QCY26 despite lower benchmark interest rates. Net markup income stood at PKR 135.9bln during CY25, supported by improvement in average current account balances and optimization in funding costs amid monetary easing. Non-markup income increased by ~7.0% to PKR 47.5bln, mainly supported by higher foreign exchange income, trade business, branch banking fees, card-related income, and digital banking activities. During 1QCY26, the Bank continued to benefit from diversified income streams and strong transactional banking activity. Non-markup expenses rose significantly by ~36.4% to PKR 117.7bln during CY25 due to network expansion, technology investments, inflationary pressures, and home remittance-related promotional expenses, while cost pressures remained elevated during 1QCY26 owing to continued investment in technology infrastructure and business expansion initiatives. Consequently, profit after tax declined to PKR 28.3bln (CY24: PKR 38.3bln), whereas profitability during 1QCY26 remained satisfactory amid a relatively lower interest rate environment.

Bank Alfalah maintained a sound financial risk profile during CY25 and into Q1 CY26, supported by adequate capitalization, stable asset quality indicators, and a resilient liquidity position. As of CY25, the Bank’s gross advances stood at PKR 1.153trln (CY24: PKR 1.156trln), and by 1QCY26, gross advances moderated to PKR 1.076 trln. Non-performing loans (NPLs) increased slightly to PKR 47.5 billion at CY25 (CY24: PKR 42.4 billion); however, the infection ratio remained manageable at ~4.1%. Encouragingly, by 1QCY26, NPLs reduced to PKR 44.4 billion, with the infection ratio holding steady at ~4.1%, reflecting effective recovery efforts and disciplined underwriting. The Bank maintained strong provisioning buffers, with a coverage ratio (including general provisions and expected credit losses) of 102% at CY25, which improved further to 106% as of 1QCY26, underscoring a conservative risk posture. Consequently, the net advances-to-deposit ratio (ADR) moderated to ~44.26% at CY25 (CY24: 51.91%) and declined further to ~41.64% by 1QCY26, reflecting a prudent balance sheet stance and enhanced liquidity management. As of CY25, the Bank’s investment portfolio increased to PKR 2,173.4 billion (CY24: PKR 1,991.2 billion), with major exposure concentrated in government securities, reflecting a preference for low-risk, liquid assets amid the declining interest rate environment. By 1QCY26, investments decreased to PKR 1,324.4 billion, driven by tactical repositioning of the bond portfolio to realize capital gains and optimize yields in a low-rate environment. The deposit base strengthened by ~16.8% to PKR 2.496 trln at CY25 (CY24: PKR 2.136 trln), supported primarily by growth in current account deposits. At 1QCY26, deposits stood at PKR 2.471 trln, remaining robust despite seasonal cash outflows. The CASA mix remained healthy, contributing positively to funding cost optimization and liquidity management. The Bank’s liquidity profile remained satisfactory, supported by a sizable pool of liquid assets (LCR of 180% at CY25) and a granular deposit base. Meanwhile, the equity base strengthened to PKR 197.5 billion at CY25 (CY24: PKR 178.1 billion) through internal profit retention, before moderating to PKR 188.1 billion at 1QCY26 due to interim dividend distributions and change in revaluation surplus mainly due to mark to market movements. The Capital Adequacy Ratio (CAR) stood at ~15.87% at CY25 (CY24: 17.96%), improving to 16.22% as of 1QCY26, while the Tier-1 CAR remained comfortably above regulatory requirements, providing a sufficient cushion against potential stress scenarios and supporting future business growth.

The proposed instrument comprises Privately Placed/DSLR Listed, Rated, Unsecured and Subordinated Tier 2 Term Finance Certificates (“TFCs”) of up to PKR 20bln, inclusive of a green shoe option of PKR 10bln, to be issued by Bank Alfalah under Section 66(1) of the Companies Act, 2017 and in accordance with SBP’s Basel III Capital Rules and BPRD Circular No. 6 of 2013. The instrument is proposed to have a tenor of 10 years with a callable feature exercisable by the Bank after five years from the issue date, subject to prior approval of the State Bank of Pakistan (“SBP”). The TFCs are expected to carry a floating profit rate linked to 6-month KIBOR plus a spread of 100bps, payable semi-annually in arrears. Principal repayment is structured as a bullet repayment at maturity. The proceeds of the issue are intended to strengthen the Bank’s Tier 2 capital base for the purpose of meeting Capital Adequacy Ratio (“CAR”) requirements and supporting future business growth. The instrument is unsecured and subordinated in nature. Furthermore, the proposed TFCs incorporate regulatory loss absorbency and lock-in clauses in line with SBP’s Basel III requirements.

The proposed Tier 2 Term Finance Certificates (“TFCs”) to be issued by Bank Alfalah Limited will constitute unsecured and subordinated obligations of the Bank, structured in compliance with the SBP’s Basel III Capital Rules and BPRD Circular No. 6 of 2013. The instrument will be subordinated as to payment of principal and profit to all senior indebtedness of the Bank, including deposits, other unsubordinated obligations, and general creditors. The TFCs will not be redeemable before their stated maturity without the prior written approval of the State Bank of Pakistan (“SBP”). As there are currently no outstanding Tier 2 capital instruments issued by the Bank, the proposed Tier 2 TFCs will rank pari passu with any future Tier 2 capital issues (if any) and will rank superior only to Additional Tier 1 (ADT-1) instruments and ordinary equity. The instrument will incorporate a mandatory loss absorbency mechanism: upon the occurrence of a Point of Non-Viability (“PONV”) event as determined by the SBP, the TFCs may be permanently written off (partially or fully) and/or converted into common shares of the Bank. Furthermore, a lock-in clause will apply, under which neither principal nor profit shall be payable if such payment would cause the Bank to breach its Minimum Capital Requirement (MCR), Capital Adequacy Ratio (CAR), or Leverage Ratio (LR). The proposed issuance is expected to strengthen the Bank’s Tier 2 capital base, enhance its overall loss-absorption capacity, and support the Bank’s Capital Adequacy Ratio (CAR) and ongoing banking operations, without altering the ranking of existing senior obligations.

The proposed Tier 2 Term Finance Certificates (“TFCs”) to be issued by Bank Alfalah are unsecured and do not carry any explicit credit enhancement in the form of collateral, guarantee, cash cover, or third-party support. The assigned preliminary rating derives comfort primarily from the Bank’s strong standalone credit profile, supported by its established market position, diversified business franchise, sound capitalization, satisfactory asset quality indicators, and robust liquidity profile. Further comfort is drawn from the Bank’s strong regulatory capital position, with the instrument intended to contribute toward BAFL’s Tier 2 capital under SBP’s Basel III framework. The Bank has consistently maintained its Capital Adequacy Ratio (CAR) comfortably above the minimum regulatory requirement, providing additional loss absorption capacity. Moreover, the Bank’s strong sponsorship profile, stable deposit franchise, prudent risk management framework, and systemic importance within Pakistan’s banking sector provide implicit support to the credit quality of the instrument. The instrument also incorporates regulatory loss absorbency features and lock-in clauses in line with SBP guidelines, which strengthen the Bank’s overall capital structure and enhance its ability to absorb stress during adverse economic conditions.