The Pakistan Credit Rating Agency Limited
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Sehar Fatima

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PACRA Maintains Entity Ratings of Bank AL Habib Limited

Rating Type Entity
(23-Jun-23 )
(25-Jun-22 )
Action Maintain Maintain
Long Term AAA AAA
Short Term A1+ A1+
Outlook Stable Stable
Rating Watch - -

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. 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. 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 (end-Dec22: 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%) The Bank expects further enhancement in CAR. 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 country’s economy has gone through several varied phases in the last few years. Looking ahead, the macroeconomic landscape is fraught with numerous challenges, including elevated interest rates, demand tightening, sizable rupee depreciation, and heightened inflation, all of which reverberate across all sectors of the economy.
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. 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 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, most of whom have a long association with the Bank.

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.