PACRA Maintains the Rating of Bank AL Habib Limited | Tier II TFC VIII | Sep-21

The ratings of the Bank reflect its enduring and sustained emphasis on reinvigorating its relative positioning in the peer universe. While the competitive landscape is becoming increasingly intensified, the Bank, under its able leadership, is actively taking measurable steps to remain competitive and, indeed, improve its positioning. Bank AL Habib has been portraying a history of stable and steady growth for more than a quarter of a century. The rating reflects the Bank's improved performance, good asset quality, strengthened financial profile, and healthy liquidity. At end-Dec23, the Bank’s deposit base posted a growth of 23% to stand at PKR 1,934bln (end-Dec22: PKR 1,568bln). The gross advances increased to stand at PKR 896bln (end-Dec22: PKR 831bln). Subsequently, the advance share of the bank increased to 7.2% (end-Dec22: 6.8%) making it one of the leading players in the industry. The infection ratio recorded a marginal uptick, still one of the lowest in the industry is a demonstration of the Bank's strength. During CY23, the Profit After Tax of the bank surged by 106% to stand at PKR 35bln (CY22: PKR 17bln) attributable to enhanced NIMR clocking in at PKR 124bln (CY22: PKR 77bln). The CAR of the Bank reflected an improvement to 15.8% (end-Dec22: 14.7%) owing to healthy profitability. The strengthening of CAR will supplement the growth cushion.
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 1,113 branches/sub-branches, including 201 Islamic Banking branches at end-Dec23. 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 nine-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 28 years. He is backed by a team of experienced professionals, most of whom have a long association with the Bank.

About the Instrument
BAHL issued a rated, unlisted, unsecured and subordinated TFC VIII in Sep-21 of PKR 5bln to contribute towards the AL Habib's Tier II Capital. 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. The tenor of the instrument is 10 years and callable on or after five years with prior approval of SBP. The profit rate is 6M-KIBOR plus 75bps and is being paid semiannually in arrears on the outstanding principal.