PACRA Maintains Entity Ratings of Faysal Bank Limited

Faysal Bank Limited (FABL) was incorporated on October 3, 1994, as a public limited company under the provisions of the Companies Ordinance 1984. Its shares are listed on Pakistan Stock Exchange (PSX). During CY22, the Bank opened 94 new branches, taking its branch network to 700 branches. In 2022, FABL completed the process of converting its operations to Islamic banking with effect from 01 January 2023. The Bank has successfully pulled a one-of-a-kind feat: the conversion of a Conventional Bank into a full-fledged Islamic Bank. The Bank now has a distinct position in the Islamic Banking space. FABL is a medium-sized Bank with sustainable growth and has witnessed an increase of 21.3% in its total deposit base to PKR 781bln (CY21: PKR 644bln). During CY22, the markup earned by the Bank witnessed a significant increase and was reported at PKR 104bln (CY21: 53.8bln), contributed equally from Islamic finances and investments. The Bank recorded a sizable increase in its profit after tax (PAT), which grew by 37.7% to PKR 11.2bln in CY22 (CY21: PKR 8.1bln) attributable to enhanced total income and reversal of PKR 940mln. During 1QCY23, Profit after tax was recorded at PKR 3.21bln as compared to PKR 2.13bln in the respective quarter of the previous year. The infection ratio, during CY22, reflected a decline, whereas the coverage ratio witnessed improvement; which is noted as a positive. CASA ratio recorded significant growth and the bank’s strategy is to maintain its positive trajectory. The Bank also intends to grow its Islamic portfolio. Assets are being deployed wisely by the Bank for higher yields with a methodically managed loan book. Despite expanding its branch network, the Bank continued to place a strong emphasis on operational efficiency, which kept associated expenses under control. These actions have bolstered the Bank's profitability and given it a safety net for its capability to absorb risk. Going forward, sustenance is necessary to maintain a positive track.
The macroeconomic landscape is fraught with numerous challenges, including political instability, elevated interest rates, demand tightening, sizable rupee depreciation, and heightened inflation, all of which reverberate across all sectors of the economy. Pakistan posted a GDP growth rate of 1.69% in 9MFY23 and 4.71% in FY22. The banking sector continues to flourish with high profitability. Gross Advances of the sector recorded growth (16%) to stand at PKR 12.6trln (end-Dec21: PKR 10.9trln). Non-performing loans witnessed an increase to PKR 924bln. The Capital Adequacy Ratio remained intact at 17% (regulatory requirement of 11.5%). During CY22, banking sector deposits enhanced to PKR 23.4trln. Net profitability of the sector was recorded at PKR 331bln (CY21: PKR 267bln); up 23% YoY. However, the growth of the equity base of the sector recorded a meager uptick of 7% YoY attributable to a handsome dividend payout.

About the Entity
FABL's shareholding is dominated by the associated companies from which Ihtmaar Bank B.S.C holds 66.78% shares and is the prominent shareholder. The remaining belong to the general public and are divided among directors, CEO, Banks, and DFIs. Ithmaar Holdings B.S.C. and its subsidiaries are engaged in a wide range of shariah compliant financial services including retail, commercial, investment banking, private banking, takaful and real estate development. A mix of seasoned bankers and businessmen with both domestic and foreign expertise make up the twelve-member BoD, which also includes the Chairman. Since May 2017, Mr. Yousaf Hussain has served as the company's CEO and president. He is a seasoned banker with over 27 years of experience, the majority of which was gained with ABN AMRO. The past 13 of those years have been spent with Faysal Bank.