Muhammad Azmat Shaheen
PACRA Assigns Initial Instrument Rating to Bank AL Habib Limited | Tier-II | TFC X | PKR 7bln | Dec'22
|Rating Type||Debt Instrument|
The ratings reflect Bank's enduring and sustained emphasis on reinvigorating its relative position in the peer universe. 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 and continued with its strategy for outreach expansion, adding significant branches every quarter to enhance geographical concentration. The rating reflects Bank's improved performance, exceptional asset quality, strong financial profile and healthy liquidity. The Bank’s customer deposits increased to PKR 1,497bln as of Sep'22 (Dec21: PKR 1,275bln), subsequently, Bank's system share enhanced to ~7.0% (CY21: 6.5%). Advances base of the Bank recorded sizable increase to stand at PKR 815.0bln (CY21: PKR 733.8bln). CAR recorded dilution to 13.41% (end-Dec21: 13.48%). During 9MCY22, the Bank’s net profit increased to PKR 15.0bln (9MCY21: PKR 13.9bln) driven by increase in non-markup income. Trade finance is the Bank's hallmark. Going forward, macro-economic environment is beset with myriad challenges due to heightened interest rate, rupee depreciation and higher inflation.
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.
BAHL, incorporated in Oct 1991, operates with a network of 1079 branches including 29 sub-branches and 178 Islamic branches as of Dec'22. The sponsors of BAHL are members of the Habib Family. BAHL’s ten-member Board of Directors include representatives of Habib Family and independent members. The CEO - Mr. Mansoor Ali Khan has been associated with the Bank for more than 25 years being backed by team of experienced professionals.
The Bank issued unsecured, rated and subordinated, up to ten years tenured term finance certificates with an issue size of PKR 7bln, to be privately placed on the PSX. The instrument bears a call option, exercisable (either partially or in full) on or after five years of the issue date. Neither profit nor principal will be payable in respect of TFC, if such payment results in a shortfall in the Bank’s MCR or CAR or LR. The TFCs shall, if directed by the SBP, may be fully and permanently converted into ordinary shares and/or be immediately written off (partially or in full) upon the Point of Non-Viability Trigger Event, subject to a cap of 145mln shares. The Issue contributes toward Bank’s Tier II Capital for CAR requirements and bears a floating rate of 6MK+1.35% p.a. The instrument redeems 0.02% of the issue amount semi-annually during first 9 years after the Issue Date and remaining amount in two equal semi-annual installments of 49.82% each in the tenth year. The instrument is subordinated as to payment of principal and profit to all other indebtedness of the Bank but superior to outstanding Additional Tier-1 issues and ordinary shares. However, the Tier II Issue ranks pari passu with any other Tier II capital issues of the Bank.