PACRA Maintains Rating of Askari Bank Limited | Tier-II TFC (TFC-VII)
|Rating Type||Debt Instrument|
Askari Bank has impeccable ownership structure. The rating of the bank incorporates the same. The bank has a strong brand image, flanked by its affiliation with one of the strongest conglomerates, Fauji Group. This represents strong ownership of the bank. This association has provided fruits in terms of market penetration, customer confidence, sustainable funding sources and avenues for generating mark-up and non-mark-up based income stream. Lately, retention of profits in the bank to bolster the capital structure is also a testimonial of support. During CY21, net markup income increased to PKR 32.4bln (CY20: PKR 30.2bln) where mix is sizably tilted towards mark-up earned from investments. Non markup income with strong share of fee and commission along with foreign exchange income remained largely same, during CY21. At end-Dec21, a significant increase has been witnessed in advances base of the bank, along with volumetric surge in investment book of the bank and asset quality improved as infection ratio Inched down to 6.1% (CY20: 6.8%). The Bank's CAR recorded at 13.4% at end-Dec21 where Tier 1 capital concentration stand at 11.7% Going forward, strengthening of CAR will remain essential to fuel growth. Askari Bank has shown stable growth rate over the years as evident by significant increase in market share in terms of deposits clocking in at 5.1% (CY20: 4.7%). Bank's updated strategy is to focus on growing its market share in retail segment, particularly low-cost deposits and consumer products. Going forward, the macro-economic environment is beset with myriad challenges due to heightened interest rate, tightening of demand, rupee depreciation and higher inflation. This has repercussions for all segments of the economy
The ratings are dependent upon sustainability of the bank's relative positioning. Prudent management of CAR remains of vital importance, going forward. Meanwhile, holding the asset quality is a pre-requisite
Askari Bank Limited, incorporated in 1991, operates with a network of 560 branches as at end Mar'22. Fauji Consortium is the key sponsor (72% stake). The remaining shareholding is widely spread. Currently, overall control of the Bank vests in the eleven-member Board of Directors (BoD) including the President and CEO. Five of the board members are Fauji Foundation nominees; four are independent members, while one represents NIT. Mr. Atif Riaz Bokhari is the new President & CEO of Askari Bank Limited. He is a seasoned banker with rich industry experience spanning over three decades.
AKBL issued a Tier-2 TFC-VII in March 2020 amounting to PKR 6bln(inclusive of a greenshoe option of PKR2bln) to boost its CAR. The TFC-VII (Tier 2) instrument is rated, DSLR listed, unsecured and subordinated as to the payment of principal and profit to all other indebtedness of AKBL, including deposits. The profit rate is 3 Month KIBOR + 1.2%. The tenor of the instrument is 10 years and profit is being paid quarterly in arrears on the outstanding principal amount. The principal is to be paid in 4 equal quarterly instalments. The call option on the instrument may be exercised on or after the 20th coupon payment (5 years), subject to approval of the SBP.