The Pakistan Credit Rating Agency Limited
Press Release


Muhammad Azmat Shaheen

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PACRA Maintains Instrument Rating of Bank AL Habib Limited | Tier-II | TFC X | PKR 7bln | Dec'22

Rating Type Debt Instrument
(27-Jun-23 )
(23-Feb-23 )
Action Maintain Initial
Long Term AAA AAA
Short Term - -
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. 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.

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.

About the Instrument
The Bank issued unsecured, rated, listed and subordinated, up to ten years tenured TFCs with an issue size of PKR 7bln. The instrument bears a call option, exercisable (either partially or in full) on or after five years of the issue date. Neither profit nor principal will be payable if such payment results in a shortfall in the Bank’s Minimum Capital Requirement (MCR) or Capital Adequacy Ratio (CAR) or Leverage Ratio (LR). The Issue contributes toward the Bank’s Tier II Capital for CAR requirements and bears a floating rate of 6MK+1.35% p.a. The instrument redeems 0.02% of the issue amount semi-annually during first 9 years and the remaining amount in two equal semi-annual installments in the 10th year. The instrument is subordinated as to payment of principal and profit to all other indebtedness of the Bank but superior to outstanding Additional Tier 1 issues and ordinary shares.

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.