PACRA Maintains Entity Ratings of Askari Bank Limited

Askari Bank has an impeccable ownership structure. The rating of the bank incorporates the same. The bank has a very strong brand image, flanked by its affiliation with one of the strongest conglomerates, Fauji Group. This represents the strength of the bank. This association has provided fruits in terms of market penetration, customer confidence, sustainable funding sources, and avenues for generating mark-up and non-mark-up-based income streams. Lately, the retention of dividends in the bank to bolster the capital structure is also a testimonial of support. During CY22, net markup income increased to PKR 39.9bln (CY21: PKR 32.4bln) where the mix is sizably tilted towards markup earned from investments. The foreign exchange income has a major share of non-mark-up income followed by Fee & Commission income. The provisioning expenses declined to PKR 1bln (CY21: PKR 4.9bln) which further augmented the profitability. The net profit increased to PKR 14bln (CY21: PKR 9.7bln). Subsequently, the spread of the bank inched up to 3.6% (CY21: 3.5%). During 1QFY23, the net profit of the bank inclined to PKR 4.7bln (1QFY22: PKR 3.6bln). At end-Dec22, the bank grew its deposit base by 13% to stand at PKR 1,143bln - where deposits remained tilted towards saving. Askari Bank has shown a stable growth rate over the years; share in terms of deposits clocking in at 5.1% (end-Dec21: 5.1%).
The expensive funding avenues of the bank will remain a challenge. A significant increase has been witnessed in the advances base of the bank, along with a volumetric surge in the investment book of the bank. The asset quality improved as the infection ratio declined to 5.1% (end-Dec21: 6.1%). The Bank's CAR inclined to 15.9% (end-Dec21: 13.4%) where Tier I capital concentration stands at 13.7% (end-Dec21: 11.7%). At end-Mar23, the total CAR of the bank stands at 14.6% with Tier I capital concentration clocking in at 12.7%, reflecting a sizable cushion for growth. The leadership is looking forward to focusing on strengthening business sustainability. Bank's updated strategy is to focus on growing its market share in the retail segment, particularly low-cost deposits. The rating draws comfort from the Bank's experienced management team, prudent risk management policies, and deep-rooted relationship with clients. The country’s economy has gone through several varied phases in the last few years. Looking ahead, the macroeconomic landscape is fraught with numerous challenges, including macroeconomic stability, elevated interest rates, demand tightening, sizable rupee depreciation, and heightened inflation, all of which reverberate across all sectors of the economy.
The ratings are dependent upon the sustainability of the bank's relative positioning. Prudent management of funding costs remains vital, going forward. Meanwhile, holding the asset quality is a prerequisite.

About the Entity
Askari Bank Limited, incorporated in 1991, operates with a network of 601 branches as at end-Mar23. Fauji Consortium is the key sponsor (71.91%) stake. The remaining (28.09%) shareholding is widely spread among financial institutions and the general public. Currently, overall control of the Bank vests in the eleven-member Board of Directors (BoD) including the President and CEO. Five of the board members are Fauji Foundation nominees; four are independent members, while one represents NIT. Mr. Atif Riaz Bokhari is the President & CEO of Askari Bank Limited. He is a seasoned banker with rich industry experience spanning over three decades. He has extensive expertise, both local and international in the financial services industry.