The Pakistan Credit Rating Agency Limited
28-Jun-19
Analyst
Muhammad Obaid
muhammad.obaid@pacra.com
+92-42-35869504
www.pacra.com
Applicable Criteria
- Methodology | Financial Institution | Jun-18
- Methodology | Criteria | Rating Modifier | Jun-18
- Methodology | Correlation Between Long-Term And Short-Term Rating Scale | Jun-18
Related Research
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PACRA Maintains Entity Ratings of Bank Alfalah Limited
| Rating Type | Entity | |
|
Current (28-Jun-19 ) |
Previous (28-Dec-18 ) |
|
| Action | Maintain | Maintain |
| Long Term | AA+ | AA+ |
| Short Term | A1+ | A1+ |
| Outlook | Stable | Stable |
| Rating Watch | - | - |
The ratings reflect relative positioning of the bank among large banks of the country. Advances grew faster than the industry average, resulting in a very high ADR of ~71%, highest amongst its peers. Another reason for the hike in ADR was less than average growth in deposit base, though the mix of which improved. The Bank shed high cost deposits and added a few percentage points to the CA part of the CASA mix. Resultantly, BAFL's cost of funds is comparable to some of the large banks. The Bank has a sound foothold with a considerable presence across the country which has enabled its deposit base to increase. Operating cost structure has improved on YoY basis on account of cost rationalization. The Bank saw healthy uptick in its profitability. Overall infection ratio has reduced due to an expanded loan book, while the Bank has maintained its asset quality. Effective implementation of the envisaged business strategy is important. The increasing asset yield and cost efficiency enabled spreads to increase. The bank issued Tier-I instrument to improve its capital, whereas, enhancing Tier-II capital through issue of a new instrument is also an option, which the Bank can continue to avail from time to time.
The Bank has continued its growth stride; continuation of the same is considered positive. Herein, augmentation of the Bank's capitalization backed by strong sponsors and adding granularity to its advances and deposits book are essential.
About
the Entity
Bank Alfalah Limited (BAFL) has a network of 649 branches, at end-Mar19, including 152 Islamic banking branches - one of the most extensive network by any conventional bank. Abu Dhabi Group (ADG), comprising some of the prominent members of UAE's ruling family and leading businessmen of UAE, continues to own majority stake (~50% at end-Dec18) in the bank.
The nine-member BoD comprises President & CEO and eight Non Executive Directors, four of whom are representatives of ADG, one represents IFC, while three are independent. Mr. Nauman Ansari is the president of the bank. He carries extensive experience in the banking industry. A team of experienced professionals assist the CEO.