PACRA Upgrades Rating of Bank AL Habib Limited | Tier-II TFC (TFC-VII)

Bank AL Habib Limited ("BAHL" or the "Bank") 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 rating reflects the Bank's improved performance, exceptional asset quality, satisfactory financial profile and healthy liquidity. The Bank’s customer deposits increased to PKR 1,256bln as at end-Sep'21 (end-Dec'20: PKR 1,083bln, end-Dec'19: PKR 890bln). Exceptional asset quality - lowest infection ratio in industry, maintained for last many years is reflective of Bank's strength. During CY21, the Bank’s net profit increased to PKR 18.7bln (Dec'20: PKR 17.8bln) driven by increase in non-markup income. Trade finance is the Bank's hallmark. The rating draws comfort from the Bank's experienced management team, prudent risk management policies and deep-rooted relationship with clients-borrowers as well as depositors. As at end-Sep'21, the Bank reported CAR of 13.9% (end-Dec'20: 15.1%). The bank's entity rating was upgraded to AAA/A1+ in Jun'21.
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.

About the Entity
BAHL, incorporated in Oct 1991, operates with a network of 956 branches/sub-branches, including 138 Islamic banking branches at end-Dec'21. The sponsors of BAHL are members of the Habib
family – one of the oldest 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.

About the Instrument
BAHL issued a rated, unlisted, unsecured and subordinated TFC-VII in Dec-2018 of PKR 4bln to contribute towards AL Habib's Tier II Capital. The funds so raised were planned to be utilized in the Bank's normal business operations. The tenor of the instrument is 10 years. The profit rate is 6M-KIBOR plus 100bps 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 other indebtedness of the bank, including deposits but will rank pari passu with other Tier II instruments and superior to Additional Tier 1 instruments and common shares.