PACRA Assigns Initial Rating to Bank AL Habib Limited | Tier-I | TFC IX | Apr-22
|Rating Type||Debt Instrument|
The ratings of the Bank reflect its enduring and sustained emphasis on reinvigorating its relative positioning in the peer universe. While the competitive landscape has been increasingly intensified, the Bank, under its able leadership, is taking measurable steps to remain competitive, indeed, improve its positioning. Bank AL Habib has been portraying a history of stable and consistent growth for more than a quarter of a century. The Bank's superior standing was witnessed in the global financial crisis almost a decade ago. The trend continued to this day and is reflected in the sound asset quality of the Bank. The Bank continued with its strategy for outreach expansion - adding significant branches every quarter to enhance geographical concentration. The rating reflects the Bank's improved performance, exceptional asset quality, strong financial profile and healthy liquidity. The Bank’s customer deposits increased to PKR 1,344bln as at end-Mar22 (endDec21: PKR 1,275bln, end-Dec20: PKR 1,083bln), subsequently, system share of the Bank enhanced (CY21: 6.5%; CY20: 6.4%). Advances base of the Bank recorded sizable increase to stand at PKR 747bln (CY21: PKR 734bln). CAR recorded dilution to 13.5% (end-Dec20: 15.1%). During CY21, the Bank’s net profit increased to PKR 18.7bln (Dec-20 PKR 17.8bln) driven by increase in non-markup income. During 1QFY22, the trend continued as Profit After Tax grew by ~8% YoY to stand at PKR 4.9bln. Trade finance is the Bank's hallmark. Going forward, the macroeconomic 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 rating is dependent on the Bank's sustained risk profile. In the wake of heightened competition, profitable growth is a challenge while retaining the relative positioning in the industry. The equity base of the Bank and CAR are satisfactory and may continually be enhanced. The Bank is enhancing its footprints in the broad financial spectrum, which is essential to meet customers' needs. Digital transformation is very important. BAHL is also into the acquirer business.
BAHL, incorporated in Oct 1991, operates with a network of 986 branches/sub-branches, including 142 Islamic Banking branches at end-Mar22. The sponsors of BAHL are members of the Habib Family – one of the oldest and most distinguished names in Pakistan’s banking sector. BAHL’s ten-member BoD includes representatives of Habib Family and independent members. Mr. Mansoor Ali Khan, the Bank’s CEO, has been associated with the Bank for more than 25 years. He is backed by a team of experienced professionals, most of whom have long association with the Bank.
BAHL issued an unsecured, unlisted, subordinated, perpetual, rated and non-cumulative TFC-IX in Apr-22 of PKR 7bln to contribute towards AL Habib's Tier I Capital. The funds raised are planned to be utilized in the Bank's normal business operations. The instrument is perpetual. The profit rate is 6M-KIBOR plus 165bps and is being paid semiannually in arrears on the outstanding principal. The instrument is unsecured and subordinated as to payment of principal and profit to all other claims except common shares and is pari passu to other Additional Tier I instruments.