The Pakistan Credit Rating Agency Limited
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Sehar Fatima

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PACRA Maintains Entity Ratings of Allied Bank Limited

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

The assigned ratings incorporate ABL’s position as one of the largest commercial banks in the country. The Bank’s technology platform is a strength. This has facilitated fast and effective decision-making while extending quality counter Banking and e-Banking services to its customers. The related benefits would continue to unfold over the years. A more focused digital drive is one of the pillars of the envisaged strategy. The rating incorporates asset quality indicators of ABL, which compare favorably to the ‘Large Banks’ median. Furthermore, the Bank’s infection at 1.5% is considered to be fairly low, and provisioning coverage is considered adequate. ABL’s liquidity profile derives strength from its sizable branch network and growing branchless banking touchpoints, which translate into a strong ability to raise deposits and maintain market positioning. ABL’s deposit generation ability is also evident from its cost of funding, which was in line with the ‘Large Banks’ median as of 2022. As is the case across the industry, ABL’s liquidity profile also incorporates sizable liquid reserves in relation to deposits and borrowings. The Bank’s risk absorption capacity, as reflected in its sound equity base, has grown over the years. An enduring emphasis is laid on building trade business. Also, more diversification is being planned to be achieved by enhancing the portfolio in consumer, housing finance, and auto loans. While CAR has reduced (Dec22: 19.7%; Dec21: 22.3%) in the outgoing year due to revaluation deficit on government security investment, in line with industry. The Bank has continued to make significant advancements in serving its customers using state-of-the-art technology and by enhancing its digital footprint so that customers are provided with all “digital and networked banking services” on the go. The ratings recognize the management's concerted efforts in sustaining the sound asset quality, which covered the comparatively high advances concentration to financially sound groups; ensuring that aggregate risks are within the Bank’s overall risk acceptance limits. The low infection ratio and good coverage ratio are considered positive. Going forward, ABL is positioned for creating long-term sustainable value for its stakeholders. The Bank is also determined to provide customer-centric innovative digital financial solutions to its diverse customer base together with committing to agility, resilience, a high level of ethics, governance, and professionalism.
The management’s ongoing concerted efforts towards enhancing diversification in its revenue stream, achieving a reduction in overall concentration, higher penetration in retail deposits and continuous improvement in cost structure remain important.

About the Entity
Allied Bank Limited’s franchise, spread over a network of 1,453 branches, has enabled sustainable footprints in the country’s deposit base. ABL is a large sized Bank with a system share of 6.8% as of end-Dec22 in the total deposits of the industry. Ibrahim Group (IG), through Ibrahim Holdings Pvt. Limited, owns 90% of shareholding in ABL. Apart from its interest in the financial sector; IG is also engaged in the manufacturing of polyester and yarn. ABL has a growing subsidiary - ABL Asset Management Company (AUM close to PKR 102bln at end-Mar23). The eight members of BoD include the CEO, three sponsoring directors, three independent directors, and one non-executive director. Mr. Aizid Razzaq Gill has been designated as the CEO since Jan-21.

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.