The Pakistan Credit Rating Agency (PACRA) has maintained both long-term and short-term ratings of AlBaraka Islamic Bank B.S.C. (E.C.) [Pakistan Branches] at “A-” (Single A minus) and “A1” (A one), respectively. PACRA also maintains the positive outlook assigned to these ratings. The ratings denote a low expectation of credit risk and strong capacity for timely payment of financial commitments.

The ratings reflect ABIB’s maintained good asset quality and strong capitalization. At the same time, ratings factor in the bank’s somewhat constrained performance and prospects relative to some other banks. This emanates from ABIB’s competitive disadvantage of limited geographical outreach, which raises difficulties in credit expansion.

The Positive Outlook reflects the increasing strength of ABG and expected benefits likely to emerge as a consequence of the proposal to change the status of ABIB to a locally incorporated bank. These benefits include availability of the capital to the bank due to freeing of the same from SBP and independence of the management leading to strategic decision making more in tune with the local market. However, as the proposal is still in the implementation phase, the expected benefits in quantitative terms are expected to be realized with a time lag. Additionally, considering the intensifying competition, the extent of the impact remains to be seen.

About the bank: AlBaraka Islamic Bank (ABIB), incorporated in Bahrain as an offshore bank, is a subsidiary (78% holding) of AlBaraka Banking Group (ABG). ABG is part of Dallah AlBaraka Group (DBG) – a Saudi-based corporate conglomerate. ABG carries out commercial and corporate banking, treasury and fund management activities through its ten subsidiaries operating in various countries. The bank, through a recently completed IPO, got listed on Bahrain Stock Exchange and Dubai International Financial Exchange. Through this issue, ABG has become one of the largest Islamic banking institutions in terms of capital (US$ 630mln).  ABIB commenced commercial operations in Pakistan in 1991 and currently operates from nine branches in the country under an Islamic banking license. The present country head - a professional banker with over three decades of experience - has been holding the position since the start of the bank’s branch operations in Pakistan.