The Pakistan Credit Rating Agency Limited
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Sehar Fatima

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PACRA Maintains Entity Ratings of Habib Metropolitan Bank Limited

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

Habib Metropolitan Bank stands out for its formidable position in meeting trade-related needs and being a frontrunner in the industry. Its strong brand, skilled bankers, and strategic partnership with Habib Bank AG Zurich contribute to its success. As part of the House of Habib, HabibMetro has a significant presence in Pakistan's business sector, particularly in deposits and advances. In the reporting period, the bank experienced a remarkable 14.0% growth in deposits, primarily due to a notable 14.4% increase in current account deposits. The bank remains committed to optimizing its deposit mix through focused efforts. The overall infection ratio experienced an uptick, reaching 4.8% (compared to 4.0% in CY21). However, the bank has successfully reduced the non-performing loans (NPLs) over the years, as indicated by the recoveries made during the last three years. Furthermore, the bank maintains a coverage ratio of over 100%, demonstrating its ability to adequately provide for potential losses related to NPLs. Despite the increase in policy rates, the Bank has managed to improve its yields, resulting in increased spreads. This overall results in continuous improvement in return on assets (ROA) and return on equity (ROE) while keeping tax rates constant. Despite the improved influx of current account deposits, the bank’s cost of funds rose due to the upward adjustment of the policy rate in CY22, resulting in increased markup expenses. Nevertheless, the bank managed to incrementally improve its net markup income. This progress, combined with growth in non-interest income, enhanced profitability. Furthermore, the Bank maintained its non-markup expenses to total income ratio of 42% compared to Dec'21, despite the expansion made by the Bank. As of the end-Dec'22, the bank’s capital adequacy ratio (CAR) increased to 14.6% compared to 14.1% in CY21. Pakistan’s economy has faced various challenges over the past year, including political upheaval, an economic crisis, and devastating floods. The country has grappled with soaring inflation, currency depreciation, and precarious foreign reserves. Despite these difficulties, the banking sector has demonstrated resilience and maintained high profitability. However, looking ahead, the macroeconomic landscape presents numerous challenges, such as elevated interest rates, tightening demand, rupee depreciation, and increased inflation, affecting all sectors of the economy.
The ratings are contingent upon the management’s ability to strengthen the bank’s position in the banking industry as a whole and specifically in its market niche of trade finance, amidst rising competition. Any deterioration in asset quality would consequently impact the bank’s profitability and its capacity to absorb risks.

About the Entity
HabibMetro, commencing operations in 1992, is listed on Pakistan Stock Exchange. The bank is a 51% owned subsidiary of HBZ. HBZ, incorporated in Switzerland in 1967, is owned and managed by the Habib family. HabibMetro makes a substantial contribution towards the consolidated assets of Habib Bank AG Zurich. HabibMetro has a nationwide network of 500 branches across 194 cities in Pakistan.HMBL's Board of Directors (BoD) consists of nine members, including the CEO and three independent directors. Among the members, there are five non-executive directors, with three of them representing HBZ. The CEO, Mr. Mohsin Nathani, carries the experience of over 33 years in the domestic and international banking industry. He is accompanied by well-known and seasoned professionals.

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.