PACRA Maintains the Rating of Bank Alfalah Limited | Additional Tier 1 TFC | 7bln

Bank Alfalah Limited ("BAFL" or the "Bank") has portrayed an impressive growth strategy ever since its inception around three decades ago. First attaining the position of a mid-sized bank, it is now in the league of large banks. With a PKR 2,136bln deposit base at end-Sep24, it boasted a competitive system share in customer deposits. The ownership and governance of the Bank are considered paramount support to the assigned ratings. The rating takes into account the robust management quality, prudent risk management policies, increasing penetration through digital channels, growing market share, diverse product suite, and successful execution of its strategic plans, as observed over a number of years. During 9MCY24, the gross performing advances increased to PKR 862bln (CY23: PKR 740bln), whereas the infection ratio clocked in at 4.6% (CY23: 4.8%). Nevertheless, the loan loss coverage ratio improved to 114%, lending comfort against total delinquency. In 9MCY24, the net profitability of the Bank was reported at PKR 33bln (CY23: PKR 36bln), and the cost-to-income ratio stood at 45.4% (CY23: 41.8%). At end-Sep24, the CAR improved to 19% (CY23: 16.7%). The ratings, on an overall basis, highlight the Bank's improved performance, strong financial profile, overall good asset quality, and healthy liquidity.
The ratings are dependent on the continued compliance of the entity with ‘AAA’ parameters. Any weakening in these parameters will be considered negative.

About the Entity
BAFL was established in 1992. The majority ownership of the bank lies with the Abu Dhabi Group (sponsors of the Bank based in Abu Dhabi, UAE), with a stake of 56.16%. Other shareholders include Mutual Funds, NBFCs, FIs, DFIs, individuals (43.70%), and executives (0.14%). The Abu Dhabi Group comprises prominent members of the UAE's ruling family and leading businessmen with global investments. BAFL's board consists of eight members, including the President/CEO and seven non-executive directors, of which four represent the Abu Dhabi Group, and three are independent. Mr. Atif Bajwa, Bank's President & CEO, brings 40 years of executive leadership experience in the banking sector.

About the Instrument
The Bank issued an Additional Tier-I Term Finance certificate ("TFCs" or the "Instrument") amounting to PKR 7bln. The instrument is listed, unsecured, subordinated, perpetual, non-cumulative and contingent convertible. The issue contributes towards supporting the Bank’s Capital Adequacy Ratio (CAR) by strengthening additional Tier-I Capital as per guidelines set by SBP. The mark-up on the TFCs is payable semiannually at a rate of 6MK+1.5%. After five years, the TFCs may be recalled and replaced with similar or better-quality capital, subject to SBP approval. According to the lock-in clause, neither profit nor principal will be paid if it causes a shortfall in the Bank's capital requirements. Additionally, in the event of a Non-Viability event, the SBP may convert the TFCs into common shares of the Bank.