PACRA Maintains the Ratings of Bank Alfalah Limited | Additional Tier 1 TFC | PKR 7bln | Dec'22

Bank Alfalah Limited (BAFL) has maintained a strong and consistent growth trajectory since its inception nearly three decades ago. Evolving from a mid-sized institution into one of the country’s leading large banks, BAFL reported a substantial deposit base of PKR 2,136.9bln as of (Dec 2023: PKR 2,084.9bln). This growth reflects a deliberate and strategic shift in its deposit mobilization approach, with a clear focus on deposit quality and maintaining a positive spread—both of which are critical for long-term sustainability. The Bank’s sustained performance across multiple dimensions underpins its current credit rating. These include robust financial fundamentals, strategic execution, and a demonstrated ability to navigate a dynamic and competitive banking environment. The Bank benefits from a strong ownership profile and sound governance practices, which provide critical support to its overall creditworthiness. Additionally, the rating reflects BAFL’s experienced management team, prudent risk management framework, expanding digital footprint, growing market share, diverse product portfolio, and a sizeable share in the remittances and trade business. On the lending side, BAFL reported gross performing advances of PKR 1,113.9bln (CY23: PKR 739.7bln), marking a significant increase over the prior year. Credit quality remained stable, with an infection ratio of ~3.7% (CY23: 4.8%). During CY24, BAFL recorded a net profit of PKR38.3bln, compared to PKR 36.5bln in CY23. The Bank's Capital Adequacy Ratio (CAR) improved to 17.96% (CY23: 16.74%), indicating a strengthened capital base. The Bank has also retained presence in allied financial services, including asset management, and insurance. Going forward, BAFL aims to enhance its SME footprint, expand in supply chain and cash management solutions, and further strengthen its home remittance corridor.
The ratings are dependent on the sustained strength of key performance and risk indicators in line with
'AAA' benchmarks. Any material weakening in these fundamentals may impact the ratings.

About the Entity
BAFL is majority-owned by the Abu Dhabi Group (The Group – sponsors of the Bank based in Abu Dhabi, UAE), with a stake of 56.06%. Other stakeholders include Mutual Funds, NBFCs, FIs, DFIs, individuals (43.82%), and executives (0.12%). The Abu Dhabi Group comprises prominent members of the UAE's ruling family and leading businessmen with global investments. In 2024, Mr. Efstratios Georgios Arapoglou, an accomplished corporate advisor and Chairman of Bank of Cyprus—joined the Board, bringing with him a wealth of international experience across banking, finance, and shipping. Mr. Atif Bajwa, Bank's President & CEO, brings 40 years of executive leadership experience in the banking sector.

About the Instrument
The Bank issued Additional Tier-I Term Finance Certificates (“TFCs” or the "Instrument") amounting to PKR 7 billion. The instrument is privately placed, listed, unsecured, subordinated, perpetual, non-cumulative, and contingent convertible. It contributes to the Bank’s Capital Adequacy Ratio (CAR) by strengthening Additional Tier-I Capital in line with SBP guidelines. Mark-up is payable semi-annually in arrears at 6-month KIBOR + 2.0% on the outstanding principal. The TFCs may be recalled and replaced with similar or higher-quality capital, subject to SBP approval, five years after the issue date or thereafter, in accordance with the call option terms. As per lock-in clause requirement, neither profit nor principal would be payable (even at maturity), if such payment will result in a shortfall in Bank's minimum capital requirement (MCR), leverage ratio (LR) or CAR or results in an increase in any existing shortfall in MCR, LR or CAR. The TFC is subject to a loss absorbency clause, which upon the occurrence of Non-Viability event, SBP may fully or permanently convert the TFCs into common shares of the Bank.