Muhammad Azmat Shaheen
PACRA Assigns Preliminary Instrument Rating to Bank Alfalah Limited | Additional Tier 1 TFC | PKR 10bln (Inclusive of PKR 3bln Green Shoe Option)
|Rating Type||Debt Instrument|
Bank Alfalah is an active player in the lending market. Its presence around different segments of advances book is also meaningful. The ratings reflect the bank's improved performance, good asset quality, strong financial profile and healthy liquidity. Asset quality improved as NPLs remained intact and overall infection ratio declined. In line with the Bank’s overall growth strategy, as on Jun'22, the gross advances of the Bank have increased by 8.1% since Dec'21, contributing to increase in Risk Weighted Assets; along with regular dividend payouts, thereby CAR stood at 14.64% as of Jun'22 (CY21: 14.43%), well above the Regulatory threshold. The bank's advances have improved to a notable level, resulting in a distinguished ADR (Net Advances to Deposits) of 55.1% as on Jun'22. Policy rates have peaked in 2022 increasing the Bank's cost of funds as well. PAT of the Bank increased by 25.5% and stood at PKR 8.7bln during 6MCY22 (6MCY21: PKR 6.9bln). The rating draws comfort from the Bank's stable ownership, experienced management team, prudent risk management policies and distinct emphasis on improving the position. Going forward, the macro-economic environment is beset with myriad challenges due to heightened interest rate, tightening of demand, rupee depreciation and higher infection.
The growth trajectory of the bank especially nurturing of the deposit & advances base and enriching the granularity would be considered positive.
Bank Alfalah Limited has a network of 839 branches, at end Jun'22, across more than 200 cities. Main sponsor comprises some of prominent members of UAE's ruling family and leading businessmen of UAE (49.79%) in the bank. BAFL's BoD comprises 8 members including President & CEO and seven Non-Executive Directors, of which four of whom are representatives of sponsoring group. Mr. Atif Bajwa (President & CEO) carries an extensive international career spanning more than 39 years of executive leadership roles.
Bank Alfalah Limited is in process of issuance of an Additional Tier-I Term Finance certificate amounting to PKR 10bln (inclusive of PKR 3bln Green Shoe option). The instrument will be privately placed and subsequently listed, unsecured, perpetual, non-cumulative and contingent convertible. The issue will contribute towards supporting the Bank’s Capital Adequacy Ratio (CAR) by strengthening additional Tier-I Capital as per guidelines set by SBP. Mark-up will be payable semi-annually in arrears on outstanding principal amount @6MK+2.0%. The TFCs may be recalled and replaced with similar or better-quality capital, subject to SBP approval, after five years from the issue date on principal redemption date or thereafter, subject to call option condition. As per lock-in clause requirement, neither profit nor principal would be payable (even at maturity), if such payment will result in a shortfall in Bank's minimum capital requirement (MCR), leverage ratio (LR) or CAR or results in an increase in any existing shortfall in MCR, LR or CAR. The TFC is subject to a loss absorbency clause, which upon the occurrence of Non-Viability event, SBP may fully or permanently convert the TFCs into common shares of the Bank.