The Pakistan Credit Rating Agency Limited
Press Release


Iram Shahzadi

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PACRA Maintains Entity Ratings of Allied Bank Limited

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

The assigned ratings incorporate ABL’s position as one of the largest commercial bank in the country. The Bank’s technology platform is a strength. This has facilitated fast and effective decision-making while extending quality counter Banking and e-Banking services to its customers. The related benefits would continue to unfold over the years. A more focused digital drive is one of the pillars of the envisaged strategy. While the competitive landscape has been increasingly intensified, the Bank should take measurable steps to remain competitive and to improve its positioning. Ratings take into account ABL’s robust liquidity profile as evident from sizeable customer base, cost-effective deposit mix and strong liquidity buffer in terms of liquid assets to deposits and borrowings. While deposit concentration level has remained same YoY where room for improvement exists. Branch network needs to be optimized in terms of deposit penetration. At the same time, Islamic windows rally behind the relative position of the bank in the sector. The Bank’s risk absorption capacity, as reflected in its sound equity base, has grown over the years. An enduring emphasis is laid on building trade business. Also, more diversification is being planned to be achieved by enhancing portfolio in consumer, housing finance and auto loans. Another reflection of this is ABL's significantly robust CAR (22.3% as at Dec21), highest in the industry. The Bank has continued to make significant advancement in serving its customers using state of the art technology and by enhancing its digital footprint so that customers are provided with all “digital and networked banking services” on the go. Further, the Bank is among the first 3 banks who have volunteered for PBA initiative in implementing blockchain based eKYC, which is customer information sharing platform among the member banks. The ratings recognize the management's concerted efforts in sustaining the sound asset quality, which covered the comparatively high advances concentration to financially sound groups; ensuring that aggregate risks are within the Bank’s overall risk acceptance limits. The low infection ratio and good coverage ratio are considered positive. Going forward, enhanced focus on digitalization and process automation to enhance efficiency and reduce cost, would augment the banking’s risk profile. Pakistan’s economy has gone through several varied phases in last two years due to the COVID19 pandemic. Going forward, the macro-economic environment is beset with myriad challenges due to heightened interest rate, tightening of demand, rupee depreciation and higher infection. This has repercussions for the entire system including banking.
The management’s ongoing concerted efforts towards enhancing diversification in its revenue stream, achieving reduction in overall concentration, higher penetration in retail deposits and continuous improvement in cost structure remain important.

About the Entity
Allied Bank Limited’s franchise, spread over a network of 1,429 branches, has enabled sustainable footprints into the country’s deposit base. ABL is a large sized Bank with a system share of ~6.5% as at end-Dec21 in the total deposits of the industry. Ibrahim Group (IG), through Ibrahim Holdings (Private) Limited, owns ~86.52% of shareholding in ABL as of Dec21. Apart from interest in financial sector; IG is also engaged in manufacturing of polyester and yarn. ABL has a growing subsidiary - ABL Asset Management Company (AUM close to PKR 94bln at end-Mar22). The eight members BoD includes the CEO, three sponsoring directors, three independent directors and one non-executive director. Mr. Aizid Razzaq Gill has been designated as the CEO since Jan21.

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.