Muhammad Azmat Shaheen
PACRA Maintains Debt Instrument Ratings of Bank AL Habib Limited | Tier-II TFC (TFC-VII)
The ratings of the Bank reflect its enduring and sustained emphasis on reinvigorating its relative positioning in the peer universe. While the competitive landscape has been increasingly intensified, the Bank, under its able leadership, is taking measurable steps to remain competitive, indeed, improve its positioning. The Bank continued with its strategy for outreach expansion - adding significant branches every quarter to enhance geographical concentration. The rating reflects the Bank's improved performance, exceptional asset quality, strong financial profile, and healthy liquidity. At end-Mar23, the Bank’s customer deposits increased to PKR 1,650bln (endDec22: PKR 1,514bln), subsequently, the deposit share of the Bank enhanced (1QCY23: 7.2%; CY22: 6.9%). The gross advances of the Bank increased to stand at PKR 899bln (end-Dec22: PKR 831bln). Exceptional asset quality – one of the lowest infection ratios in the industry, maintained for the last many years is reflective of Bank's strength. During CY22, the Bank’s net profit reported at PKR 16.6bln (CY21: PKR 18.7bln) caused by an increase in the provisioning expenses mainly against sovereign bonds clocking in at PKR 12.9bln (CY21: PKR 47mln). Trade finance is the hallmark of Bank ensuring continuous revenue stream. The rating draws comfort from the Bank's experienced management team, prudent risk management policies, and deep-rooted relationship with customers-borrowers as well as depositors. At end-Dec22, the CAR of the Bank inclined to 14.7% (end-Dec21: 13.5%). During 1QCY23, the net profit of the bank inclined to PKR 10.5bln (1QCY22: PKR 5.0bln) owing to enhanced NIMR clocking in at PKR 24.6bln (1QCY22: PKR 16bln). However, at end-Mar23, the equity base is affected by a deficit in the investment book, mainly comprising local and foreign government debt securities.
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 is satisfactory and may continually be enhanced.
BAHL, incorporated in Oct 1991, operates with a network of 1,081 branches/sub-branches, including 178 Islamic Banking branches at end-Mar23. The sponsors of BAHL are members of the Habib Family – one of the oldest and most distinguished names in Pakistan’s banking sector. BAHL’s ten-member BoD includes representatives of the Habib Family and independent members. Mr. Mansoor Ali Khan, the Bank’s CEO, has been associated with the Bank for more than 27 years. He is backed by a team of experienced professionals.
BAHL issued a rated, unlisted, unsecured and subordinated TFC-VII in Dec-18 of PKR 4bln to contribute towards AL Habib's Tier II Capital. The funds raised were utilized in the Bank's normal business operations. The tenor of the instrument is 10 years and callable on or after five years with prior approval of SBP. The profit rate is 6MK+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 I instruments and common shares.