The Pakistan Credit Rating Agency Limited
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Sehar Fatima

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PACRA Maintains Entity Ratings of Faysal Bank Limited

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

Faysal Bank has registered a remarkable journey towards becoming and achieving a full-fledged Islamic bank. This is important as it is first of its kind globally. Given a pertinent focus towards and demand for transition towards Islamic Banking in the country, Faysal Bank stands at a distinct advantage. The conversion process is expected to be completed over the short horizon. FABL opened 30 new Islamic branches and converted 65 branches to Islamic during CY21, increasing the Islamic branch network to 595 branches, making it the biggest network of dedicated Islamic Branches amongst all conventional banks in Pakistan. Moreover, the Bank has launched the first ever Tawaruq based Islamic Credit Card to target a large unserved customer base. The ratings take comfort from the Faysal Bank Limited's (FABL) association with a foreign business group – (Dar Al-Maal Al Islami Trust). The presence of sponsor’s nominees on the Board stands to provide it with the industry-specific working knowledge and strategic thinking capability. The Bank has also benefited from management stability over the past several years. FABL continued its focus on growth while maintaining its relative positioning among medium sized banks. The Bank has 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, related costs remained in check. These initiatives have supported the Bank’s profitability and provided a cushion against risk absorption capacity. The bank recorded improved total income and growth in profitability. Going forward, positive trajectory should sustain. 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 remains a highly capitalized commercial bank with a common equity tier 1 (CET-1) ratio of 15.7% as at Dec-21. 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 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 606 branches, holds ~3.0% share in total banking deposits at Dec-21. 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 Holdings 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 eleven-member BoD, including the Chairman, comprises a mix of experienced bankers and businessmen having domestic and international experience. Mr. Yousaf Hussain, the CEO & President since May 2017, is an experienced banker with over 27 years of experience primarily with ABN AMRO and the last 13 years with Faysal Bank and is supported by an experienced and qualified team.

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.