The Pakistan Credit Rating Agency Limited
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Sehar Fatima

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PACRA Maintains Entity Ratings of Askari Bank Limited

Rating Type Entity
(25-Jun-22 )
(25-Jun-21 )
Action Maintain Maintain
Long Term AA+ AA+
Short Term A1+ A1+
Outlook Stable Stable
Rating Watch - -

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 conglomerate, 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 mark up income with strong share of fee and commission along with foreign exchange income remained largely same, during CY21. Higher provisioning expense and operating expenses led to decline in net profitability. 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%). The new leadership is looking forward to focus on strengthening business sustainability. Bank's updated strategy is to focus on growing its market share in retail segment, particularly low cost deposits and consumer products. Pakistan’s economy has gone through several varied phases in last two years due to the COVID19 pandemic. Banking sector continued to flourish with high profitability. 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.

About the Entity
Askari Bank Limited, incorporated in 1991, operates with a network of 560 branches as at end-Mar22. 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. He has extensive expertise, both local and international in the financial services industry.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.