PACRA Maintains Debt Instrument Rating of Askari Bank Limited | Tier-II TFC (TFC-VII)

Askari Bank's ("AKBL" or the "Bank") assigned ratings benefit from a robust and distinguished ownership structure. The Bank’s strong brand image is further reinforced by its affiliation with the Fauji Group—one of the country’s most prominent conglomerates. This strategic association has translated into tangible advantages, including enhanced market penetration, elevated customer confidence, access to diversified and sustainable funding sources, and the development of both interest-based and non-interest-based income streams. During the year, the Bank expanded its branch network by opening 60 new branches—53 of which were Islamic—bringing the total to 720 branches, including its international presence in Bahrain and Beijing. AKBL has also made focused efforts to promote business from China, leveraging the positive spillover effects of Chinese investment in Pakistan. Under the guidance of its Shariah Board and professional bankers, Askari Ikhlas Islamic Banking offers a diversified range of Shariah-compliant products and services. Backed by the Fauji Group, the Bank leveraged partnerships with 670 global institutions across 88 countries to boost trade and remittances, while net markup income surged by 6.5% to PKR 63.3bln (CY23: PKR 59.4bln), driven by robust investment and markup income. As of Dec'24, Askari Bank experienced a 5.5% growth in its rock-solid deposits given its exclusive franchise, reaching PKR 1,363bln, with a predominant focus on savings deposits. The Bank's strategic use of funding sources has supported its growth initiatives. Notably, there has been a substantial expansion in the Bank's loan portfolio, at the end of Dec'24 the gross advances stood at PKR ~733bln (CY23: PKR~ 661.3bln), accompanied by a significant increase in its investment book, which stood at PKR ~1,509.7bln mainly invested in Government securities compared to CY23: PKR 1,182.5bln. The Bank's asset quality demonstrated improvement, with the infection ratio inching up to 4.7% in CY24 (CY23: 4.4%). The Bank's CAR improved to 21.4% (CY23: 18.35%).
The Bank is committed to maintain capital ratios well above prescribed thresholds for better risk absorption. The ratings depend on the Bank's ability to maintain its competitive position. Going forward, prudent management of funding costs is crucial, and maintaining asset quality remains essential.

About the Entity
Askari Bank Limited, incorporated in 1991, operates with a network of 720 branches as of Dec'24. The Fauji Consortium is the key sponsor, holding a 71.91% stake in the Bank. 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. Mr. Zia Ijaz has been appointed as the new President and CEO of the Bank since 17th February, 2025. He is a Fellow Chartered Accountant (FCA) and a member of ICAP Pakistan. Before joining AKBL, he worked at different leading commercial banks in Pakistan and abroad.

About the Instrument
Askari Bank issued Tier-2 TFC-VII ("TFCs" or the "Instrument") worth PKR 6 billion in March 2020 to strengthen its Tier II capital and comply with CAR requirements. This DSLR-listed, rated, unsecured, and subordinated instrument carries a profit rate of 3M KIBOR + 1.2%, payable quarterly in arrears. The 10-year tenor instrument features principal repayment in four equal quarterly installments. Neither profit nor principal will be payable in respect of TFCs if such payment results in a shortfall in the Bank’s LR, MCR or CAR. The Bank may call the TFCs, with prior approval of SBP, after five years from the date of issue. The TFCs shall, if directed by the SBP, be fully and permanently converted into ordinary shares subject to a cap of 245,042,630 shares and/or have them immediately written off (either full/partial) upon the PONV Trigger Event. The Bank has paid the latest profit payment of Tier-II TFC due on 17 Jun 2025.