The Pakistan Credit Rating Agency Limited
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Wajeeha Asghar

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PACRA Maintains Debt Instrument Rating of Askari Bank Limited | Tier-II TFC (TFC-VII)

Rating Type Debt Instrument
(23-Jun-23 )
(24-Jun-22 )
Action Maintain Maintain
Long Term AA AA
Short Term - -
Outlook Stable Stable
Rating Watch - -

Askari Bank has an impeccable ownership structure. The rating of the bank incorporates the same. The bank has a very strong brand image, flanked by its affiliation with one of the strongest conglomerates, Fauji Group. This represents the strength of the bank. During CY22, net markup income increased to PKR 39.9bln (CY21: PKR 32.4bln) where the mix is sizably tilted towards markup earned from investments. The foreign exchange income has a major share of non mark-up income followed by Fee & Commission income. The provisioning expenses declined to PKR 1bln (CY21: PKR 4.9bln) which further augmented the profitability. The net profit increased to PKR 14bln (CY21: PKR 9.7bln). Subsequently, the spread of the bank inched up to 3.6% (CY21: 3.5%). During 1QFY23, the net profit of the bank inclined to PKR 4.7bln (1QFY22: PKR 3.6bln). At end-Dec22, the bank grew its deposit base by 13% to stand at PKR 1,143bln - where deposits remained tilted towards saving. Askari Bank has shown a stable growth rate over the years; share in terms of deposits clocking in at 5.1% (end-Dec21: 5.1%). The Bank's CAR inclined to 15.9% (end-Dec21: 13.4%) where Tier I capital concentration stands at 13.7% (end-Dec21: 11.7%). At end-Mar23, the total CAR of the bank stands at 14.6% with Tier I capital concentration clocking in at 12.7%, reflecting a sizable cushion for growth.
The ratings are dependent upon the sustainability of the bank's relative positioning. Prudent management of funding costs remains vital, going forward. Meanwhile, holding the asset quality is
a prerequisite.

About the Entity
Askari Bank Limited, incorporated in 1991, operates with a network of 601 branches as at endMar23. Fauji Consortium is the key sponsor (71.91%) stake. The remaining (28.09%) shareholding is widely spread among financial institutions and the general public. Currently, overall control of the Bank vests in the eleven-member Board of Directors (BoD) including the President and CEO. Five of the board members are Fauji Foundation nominees; four are independent members, while one represents NIT. Mr. Atif Riaz Bokhari is the President & CEO of Askari Bank Limited. He is a seasoned banker with rich industry experience spanning over three decades. He has extensive expertise, both local and international in the financial services industry.

About the Instrument
Askari Bank issued Tier-2 TFC-VII of PKR 6bln on Mar-20 to contribute towards AKBL’s Tier II capital for complying with the CAR requirement. The TFC-VII (Tier 2) instrument is rated, DSLR listed, unsecured and subordinated as to the payment of principal and profit to all other indebtedness of AKBL, including deposits. The profit rate is 3 Month KIBOR + 1.2% and profit is paid quarterly in arrears on the outstanding principal amount. The tenor of the instrument is 10 years. The principal is to be paid in four equal quarterly installments. Neither profit nor principle will be payable in respect of TFC, if such payment results in a shortfall in the bank’s MCR or CAR. The bank may call the TFCs, with prior approval of SBP, after five years from the date of issue. The TFCs shall, if directed by the SBP, be fully and permanently converted into ordinary shares and/or have them immediately written off (partially or in full) upon the PONV Trigger Event.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.