Askari Bank Limited | TFC VI ( Additional Tier I ) | Jul-18

RATING REPORT | Jan-26

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Rating History
Dissemination Date Long-Term Rating Short-Term Rating Outlook Action Rating Watch
16-Jan-26 AA- - Stable Maintain -
30-Jun-25 AA- - Stable Maintain -
02-Jan-25 AA- - Stable Maintain -
28-Jun-24 AA- - Stable Maintain -
28-Dec-23 AA- - Stable Maintain -
About the Instrument

Askari Bank issued TFC VI (Additional Tier I) of PKR 6bln in Jul-18 to contribute towards AKBL’s Tier I capital for complying with the CAR requirement. The TFC is an Over the Counter (OTC), listed, unsecured, subordinated, perpetual, and non-cumulative instrument. The profit rate is 6MK+1.5% and is being paid semi-annually in arrears on the outstanding principal amount. Neither profit nor principal will be payable in respect of TFC if such payment results in a shortfall in the Bank’s 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 and/or have them immediately written off upon the PONV Trigger Event. The Bank has paid the profit payment of Tier-I TFC due in Jan 2026; the next payment is due in July 2026.

Rating Rationale

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 37 new branches, bringing the total to 757 branches, including its international presence in Bahrain and Beijing. The Bank is pursuing conversion of its conventional banking business to Islamic, and at present, over 50 percent of the branch network is Islamic, offering Shariah-compliant products and services, and the remaining branches are also offering Islamic banking deposit products through Islamic Windows. AKBL has also made focused efforts to promote business from China, leveraging the positive spillover effects of Chinese investment in Pakistan. Backed by the Fauji Group, the Bank leveraged partnerships with 551 global institutions across 80 countries to boost trade and remittances, while net markup income surged by 47.3% to PKR 65.3bln (9MCY24: PKR 44.3bln), driven by robust investment and markup income. As of 9MCY25, Askari Bank experienced an 11.1% growth in its rock-solid deposits given its exclusive franchise, reaching PKR 1,515.2bln (CY24: PKR 1,363.7bln), with a predominant focus on current deposits. Notably, a significant increase in its investment book during 9MCY25, which stood at PKR ~1,968.5bln, mainly invested in Government securities, compared to CY24: PKR 1,509.7bln. Infection ratio stood at 5.9% (CY24: 4.7%), while NPL coverage ratio is reported at 113%, reflecting a comfortable provisioning buffer that fully covers impaired loans and provides resilience against potential credit shocks, thereby reinforcing the Bank’s prudent risk management posture. The Bank's CAR improved to 22.7% (CY24: 21.4%).

Key Rating Drivers

The Bank aims to maintain capital buffers above requirements, while ratings depend on sustained competitiveness, controlled funding costs, and preserved asset quality.

REPORT CONTENTS
  1. Rating Analysis
  2. Financial Summary
  3. Rating Scale
  4. Regulatory Disclosure

Askari Bank Limited | TFC VI ( Additional Tier I ) | Jul-18


Rating Analysis

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Issuer Profile
Profile

Askari Bank Limited ("AKBL" or the "Bank"), incorporated as a public limited company in 1991, is listed on the Pakistan Stock Exchange. The Bank commenced its operations as a Scheduled Commercial Bank in 1992. The registered office of the Bank is situated at AWT Plaza, the Mall, Rawalpindi, and the head office is located in Islamabad. The Bank is principally engaged in the business of banking as defined in the Banking Companies Ordinance, 1962 and operates with  757 branches (2024: 720 branches); 756 (2024: 719) in Pakistan and Azad Jammu and Kashmir, and a Wholesale Bank Branch (WBB) in the Kingdom of Bahrain. The Bank provides a diverse range of products across conventional and Islamic banking.


Ownership

The Fauji Consortium: comprising of Fauji Foundation (FF) and Fauji Fertilizer Company Limited (FFCL), collectively owns 71.91 (2024: 71.91 ) percent shares of the Bank. The ultimate parent of the Bank is Fauji Foundation. The remaining stake of 28.09% is widely spread among financial institutions and the general public. Over the years, The Fauji Group, has emerged as one of the leading conglomerates of the country with established business interests in numerous sectors and industries. The Fauji Group comprises several industrial/commercial projects in various sectors, including energy, gas supply, fertilizer, cement, food, oil & gas exploration, financial services, etc., including wholly-owned as well as partly-owned ventures. The Fauji Group is one of the leading and most diversified groups in Pakistan. The group has a very strong equity and asset base. Over the years, the group has stretched its business profile by entering into new industries, providing it with diversity; in revenue streams, a very strong brand image, and increased hands-on knowledge of the various sectors of the economy.


Governance

The 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 (National Investment Trust). Lt Gen Anwar Ali Hyder, HI(M) (Retd) is the Chairman of the Board. The Board members bring diverse experience and strong academic backgrounds. Their expertise spans over financial institutions, public sector entities, oil and gas, power, fertilizers, information technology, and other sectors. The key competencies of the members are closely aligned with the Bank’s business objectives. The Bank has four Board Committees in place: i) Risk Management Committee, ii) Audit Committee, iii) Human Resource and Remuneration Committee, and iv) Information Technology Committee, which help the Board in the effective oversight of the Bank’s overall operations on relevant matters. KPMG Taseer Hadi & Co., Chartered Accountants, served as the external auditors of the Bank for the year ended December 31, 2024. They expressed an unqualified opinion on the Bank’s financial statements for CY2024. For 2025 and onwards, A.F. Ferguson & Co. (a member firm of PwC) has been appointed as the external auditor of the Bank. Furthermore, the Bank has an independent Internal Audit Function that directly reports to the Board Audit Committee (BAC) and provides independent assurance on the quality, effectiveness and adequacy of the Bank’s governance, risk management, and control environment.


Management

The Bank operates through a well-defined organizational structure headed by the President and CEO. Mr. Zia Ijaz is the President and CEO of the Bank. He is a seasoned banker with over three decades of extensive banking experience, having held senior leadership roles in leading banks in Pakistan and abroad. Mr. Zia Ijaz is a Fellow Chartered Accountant and a member of ICAP Pakistan. The Bank's operations are divided into 12 functions, 11 of which report directly to the President and CEO. The Chief Internal Auditor reports to the Board Audit Committee. The Bank has seven management committees in place, chaired by the President and CEO, to oversee its day-to-day operational matters. The committees ensure that the Bank is aligned with its current strategy. The Bank’s core banking software is Flexcube, developed by Oracle Financial Services, and has an Oracle Based Enterprise Risk Management solution and a Loan Origination System. These systems not only enhance operational efficiency in the risk management processes but also promote integrated risk assessment. Furthermore, the Bank has recorded a significant improvement in its cybersecurity posture to mitigate rising challenges and comply with best practices. The Bank has a robust Risk Management Framework driven by the Board Risk Management Committee and supported by multi-tier management structures, including credit risk & operational risk committees and ALCO (for interest rate and market risk), to ensure that the risk tolerance is well defined and remains aligned with risk appetite, considering factors such as size, financials, and market standing. Risk Management Group is headed by the Chief Risk Officer (CRO), who oversees the management of Credit, market/liquidity, Information Security, and Operational Risk.


Business Risk

During 9MCY25, Pakistan's Banking sector's total assets posted growth of ~9.5% YTD whilst investments surged by ~23.4% to PKR ~36.7trln (CY24: PKR ~29.8trln). Net Advances of the sector recorded a decline of ~16.3% to stand at PKR ~13.2trln (CY24: PKR ~15.8trln). Non-performing loans witnessed a decrease of 11.2% YTD to PKR ~948bln (CY24: PKR ~1,068bln). The CAR averaged at 22.1% (CY24: 20.6%). Given the low monetary rate and high cost environment, Banks are likely to show some dilution in profitability by the end of CY25 (Source: SBP Compendium). AKBL holds a customer deposit base of PKR 1,492bln, other than financial institutions, at the end of 9MCY25 (CY24: PKR 1,344bln). The market share of deposits of the Bank dipped to 4.0% (CY24: 4.6%). During 9MCY25, AKBL’s net markup income witnessed an increase of 47.3% YoY to stand at PKR 65.3bln (9MCY24: PKR 44.3bln), where markup income recorded a decrease of 27.8% YoY to stand at PKR 225.1bln (9MCY24: PKR 311.7bln). The Bank’s asset yield declined to 12.6% (9MCY24: 21.7%); similarly, the portfolio spread declined slightly to 3.8% (CY24: 4.1%) in line with market rates. During 9MCY25, non-mark-up income increased by 18.7% to stand at PKR 13.1bln (9MCY24: PKR 11bln). Non-markup expenses increased by 29.6% YoY to stand at PKR 34.2bln (9MCY24: PKR 26.4bln). The non-markup income to total income declined to 16.7% (9MCY24: 19.9%). The increase in the non-markup expenses is mainly driven by the high cost of technology infrastructure and branch expansion initiatives. Subsequently, the net profit stood at PKR 18.06bln (9MCY24: PKR 14.02bln). AKBL will continue to focus on the growth of core revenues, current accounts, and return on assets by optimizing and reallocating assets and resources to their full potential, and will pursue acquiring high-quality assets while enhancing relationship yields and maintaining an optimal risk profile using technology at its best.


Financial Risk

At 9MCY25, AKBL’s gross advances registered a decline of 20.3% YTD to stand at PKR 584.3bln (CY24: PKR 733.1bln). The Bank’s gross Advances to Deposits ratio (ADR) reported at 38.6% (CY24: 53.7%). While the ADR based on net advances reported at 36% (CY24: 51%). The infection ratio increased to 5.9% (CY24: 4.7%). The Bank has recorded PKR 34.3bln NPLs during 9MCY25 (CY24: PKR 34.4bln). At 9MCY25, the investment portfolio reflected an expansion of 30.4% to PKR  1,968.5bln (CY24: PKR 1,509.7bln). Government securities continued to dominate the overall investment portfolio, comprising 98% of total investments as of 9MCY25 (CY24: 98.3%). The Bank’s prudent strategy in government securities ensures capital preservation, mitigates risk, secures steady returns, and enhances financial stability. The Bank currently maintains a liquidity buffer that is sufficient to cater to any adverse movement in the cash flow maturity profile. 98% of AKBL's investment portfolio consists of government securities. Additionally, the overall liquidity ratio stood at 70.6% (CY24: 60.6%). The current account ratio (CA) stood at 32.3% (CY24: 28.4%), the saving account ratio (SA) stood at 57.9% (CY24: 61.3%), and the CASA ratio stood at 90.2% (CY24: 89.7%). The Bank remains well capitalized, maintaining strong buffers above regulatory requirements. As of 9MCY25, the Capital Adequacy Ratio (CAR) stood at 22.7% (CY24: 21.4%), with a Tier I CAR of 18.9% (CY24: 17.9%), in full compliance with SBP’s minimum thresholds. The Bank is committed to sustaining capital ratios significantly above the regulatory benchmarks to ensure robust risk absorption capacity. The equity base of the Bank stood at PKR 141.4bln at the end of 9MCY25 (CY24: PKR 121.6bln).


Instrument Rating Considerations
About the Instrument

The Bank issued an unsecured, subordinated, perpetual, rated and OTC-listed Term Finance Certificate-VI (“TFC” or the “Issue” or “Instruments”). The issue amounts to PKR 6bln, inclusive of a Green Shoe option of PKR 1.5bln. The profit rate is 6 Months KIBOR + 1.5%. The profit is being paid semiannually in arrears on the outstanding principal amount. The amount raised through this Issue contributed toward Bank’s Additional Tier I Capital for maintaining the Capital Adequacy Ratio. The funds so raised are utilized in Bank’s normal business operations as permitted by its Memorandum & Articles of Association. The Bank has paid the profit payment of Jan 2026, and the next payment is due in July 2026.


Relative Seniority/Subordination of Instrument

The instrument is subordinated as to the payment of principal and profit to all other claims except common shares. In addition to the Lock In clause, the Instrument is subject to 1) loss absorption upon the occurrence of a Pre Specified Trigger (“PST”) i.e. issuer’s CET1 ratio falls to/below 6.625% of Risk-Weighted Assets; and 2) loss absorption and/or any other requirements of SBP upon the occurrence of a Point of Non-Viability (“PONV”). Upon reaching the pre-defined trigger point or point of non-viability (PONV), the TFC may be converted into equity/written off (Partially or in full) as per the discretion/instructions of SBP subject to a specified cap.


Credit Enhancement

The instrument is unsecured.
 
 

Jan-26

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Askari Bank Limited | TFC VI ( Additional Tier I ) | Jul-18


Financial Summary

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(PKR mln)


 Sep-25
9M		 Dec-24
12M		 Dec-23
12M		 Dec-22
12M
A. BALANCE SHEET
1. Stage I | Advances - net 456,297 637,346 629,706 581,962
2. Stage II | Advances - net 87,823 56,265 0 0
3. Stage III | Non-Performing Advances 34,306 34,429 29,064 31,147
4. Stage III | Impairment Provision (32,844) (32,281) (25,637) (29,298)
5. Investments in Government Securities 1,932,125 1,481,818 1,159,310 745,164
6. Other Investments 36,414 27,928 23,188 17,367
7. Other Earning Assets 30,763 27,008 25,102 6,668
8. Non-Earning Assets 282,475 265,863 283,273 173,124
Total Assets 2,827,359 2,498,374 2,124,006 1,526,134
6. Deposits 1,515,229 1,363,735 1,293,146 1,142,575
7. Borrowings 1,073,069 881,212 655,363 245,432
8. Other Liabilities (Non-Interest Bearing) 97,662 131,798 78,375 64,805
Total Liabilities 2,685,960 2,376,746 2,026,883 1,452,811
Equity 141,399 121,629 97,123 73,322
B. INCOME STATEMENT
1. Mark Up Earned 225,089 401,028 305,636 165,796
2. Mark Up Expensed (159,820) (337,749) (246,214) (125,834)
3. Non Mark Up Income 13,071 15,441 12,936 11,620
Total Income 78,340 78,721 72,359 51,582
4. Non-Mark Up Expenses (34,182) (36,021) (29,348) (23,080)
5. Provisions/Write offs/Reversals (807) 1,807 (966) (1,042)
Pre-Tax Profit 43,350 44,507 42,044 27,459
6. Taxes (25,286) (23,485) (20,610) (13,398)
Profit After Tax 18,064 21,023 21,435 14,062
C. RATIO ANALYSIS
1. Performance
Net Mark Up Income / Avg. Assets 3.3% 2.7% 3.3% 2.9%
Non-Mark Up Expenses / Total Income 43.6% 45.8% 40.6% 44.7%
ROE 18.3% 19.2% 25.2% 21.8%
2. Capital Adequacy
Equity / Total Assets (D+E+F) 5.0% 4.9% 4.6% 4.8%
Capital Adequacy Ratio 22.7% 21.4% 18.3% 15.9%
3. Funding & Liquidity
Liquid Assets / (Deposits + Borrowings Net of Repo) 70.6% 60.6% 55.3% 53.8%
Net Financial Assets to Deposits Ratio [(Total Finances - net + Non-Performing Finances - net) / Deposits] 36.01% 51.02% 48.96% 51.10%
Current Deposits / Deposits 32.3% 28.4% 27.3% 30.6%
Saving Deposits / Deposits 57.9% 61.3% 56.6% 49.5%
4. Credit Risk
Impaired Loan Ratio | [Stage III | Non-Performing Advances / Gross Advances] 5.9% 4.7% 4.4% 5.1%

Jan-26

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Askari Bank Limited | TFC VI ( Additional Tier I ) | Jul-18


Rating Scale

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Jan-26

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Askari Bank Limited | TFC VI ( Additional Tier I ) | Jul-18


regulatory disclosure

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  1. Rating Team Statements
    1. Rating is just an opinion about the creditworthiness of the entity and does not constitute a recommendation to buy, hold, or sell any security of the entity rated or to buy, hold, or sell the security rated, as the case may be. (Chapter III; 14-3-(x))
    2. Conflict of Interest
      1. The Rating Team or any of their family members have no interest in this rating (Chapter III; 12-2-(j))
      2. PACRA, the analysts involved in the rating process, and members of its rating committee and their family members do not have any conflict of interest relating to the rating done by them (Chapter III; 12-2-(e) & (k))
      3. The analyst is not a substantial shareholder of the customer being rated by PACRA [Annexure F; d-(ii)]
      4. Explanation: for the purpose of the above clause, the term "family members" shall include only those family members who are dependent on the analyst and members of the rating committee.
  2. Restrictions
    1. No director, officer, or employee of PACRA communicates the information acquired by him for use for rating purposes to any other person, except where required under law to do so. (Chapter III; 10-(5))
    2. PACRA does not disclose or discuss with outside parties or make improper use of the non-public information which has come to its knowledge during a business relationship with the customer. (Chapter III; 10-7-(d))
    3. PACRA does not make proposals or recommendations regarding the activities of rated entities that could impact a credit rating of the entity subject to rating. (Chapter III; 10-7-(k))
  3. Conduct of Business
    1. PACRA fulfills its obligations in a fair, efficient, transparent, and ethical manner and renders high standards of services in performing its functions and obligations. (Chapter III; 11-A-(a))
    2. PACRA uses due care in the preparation of this Rating Report. Our information has been obtained from sources we consider to be reliable, but its accuracy or completeness is not guaranteed. PACRA does not, in every instance, independently verify or validate information received in the rating process or in preparing this Rating Report. (Clause 11-(A)(p))
    3. PACRA prohibits its employees and analysts from soliciting money, gifts, or favors from anyone with whom PACRA conducts business. (Chapter III; 11-A-(q))
    4. PACRA ensures before the commencement of the rating process that an analyst or employee has not had a recent employment or other significant business or personal relationship with the rated entity that may cause or may be perceived as causing a conflict of interest. (Chapter III; 11-A-(r))
    5. PACRA maintains the principle of integrity in seeking rating business. (Chapter III; 11-A-(u))
    6. PACRA promptly investigates in the event of misconduct or a breach of the policies, procedures, and controls, and takes appropriate steps to rectify any weaknesses to prevent any recurrence, along with suitable punitive action against the responsible employee(s). (Chapter III; 11-B-(m))
  4. Independence & Conflict of Interest
    1. PACRA receives compensation from the entity being rated or any third party for the rating services it offers. The receipt of this compensation has no influence on PACRA’s opinions or other analytical processes. In all instances, PACRA is committed to preserving the objectivity, integrity, and independence of its ratings. Our relationship is governed by two distinct mandates: i) rating mandate - signed with the entity being rated or issuer of the debt instrument, and ii) fee mandate - signed with the payer, which can be different from the entity.
    2. PACRA does not provide consultancy/advisory services or other services to any of its customers or their associated companies and associated undertakings that are being rated or have been rated by it during the preceding three years, unless it has an adequate mechanism in place ensuring that the provision of such services does not lead to a conflict of interest situation with its rating activities. (Chapter III; 12-2-(d))
    3. PACRA discloses that no shareholder directly or indirectly holding 10% or more of the share capital of PACRA also holds directly or indirectly 10% or more of the share capital of the entity which is subject to rating or the entity which issued the instrument subject to rating by PACRA. (Chapter III; 12-2-(f))
    4. PACRA ensures that the rating assigned to an entity or instrument is not affected by the existence of a business relationship between PACRA and the entity or any other party, or the non-existence of such a relationship. (Chapter III; 12-2-(i))
    5. PACRA ensures that the analysts or any of their family members shall not buy, sell, or engage in any transaction in any security which falls in the analyst’s area of primary analytical responsibility. This clause, however, does not apply to investments in securities through collective investment schemes. (Chapter III; 12-2-(l))
    6. PACRA has established policies and procedures governing investments and trading in securities by its employees and for monitoring the same to prevent insider trading, market manipulation, or any other market abuse. (Chapter III; 11-B-(g))
  5. Monitoring and Review
    1. PACRA monitors all the outstanding ratings continuously, and any potential change therein due to any event associated with the issuer, the security arrangement, the industry, etc., is disseminated to the market immediately and in an effective manner after appropriate consultation with the entity/issuer. (Chapter III; 17-(a))
    2. PACRA reviews all the outstanding ratings periodically on an annual basis. Provided that public dissemination of annual review and in an instance of change in rating will be made. (Chapter III; 17-(b))
    3. PACRA initiates an immediate review of the outstanding rating upon becoming aware of any information that may reasonably be expected to result in downgrading of the rating. (Chapter III; 17-(c))
    4. PACRA engages with the issuer and the debt securities trustee to remain updated on all information pertaining to the rating of the entity/instrument. (Chapter III; 17-(d))
  6. Probability of Default
    1. PACRA’s Rating Scale reflects the expectation of credit risk. The highest rating has the lowest relative likelihood of default (i.e., probability). PACRA’s transition studies capture the historical performance behavior of a specific rating notch. Transition behavior of the assigned rating can be obtained from PACRA’s Transition Study available at our website. (www.pacra.com) However, the actual transition of rating may not follow the pattern observed in the past. (Chapter III; 14-3(f)(vii))
  7. Proprietary Information
    1. All information contained herein is considered proprietary by PACRA. Hence, none of the information in this document can be copied or otherwise reproduced, stored, or disseminated in whole or in part in any form or by any means whatsoever by any person without PACRA’s prior written consent.

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Askari Bank Limited | TFC VI ( Additional Tier I ) | Jul-18


Regulatory & Supplementary Disclosure

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Nature of Instrument Size of Issue (PKR mln) Tenor Security Issue Agent Book Value of Security Assets (PKR mln)
TFC - ADT 1 PKR 6,000 mln Perpetual Unsecured and subordinated to all other obligations of the Bank. Pak Oman Investment Company Limited NA
Name of Issuer Askari Bank Limited
Issue Date 1-Jul-18
Maturity Perpetual
Call Option Yes
Profit Rate 6MK + 1.5%

Askari Bank Limited | TFC VI ( Additional Tier I ) | Jul-18 | Redemption Schedule

Redemption Schedule not applicable since its a perpetual TFC whereby there is no fixed or final redemption date. Profit (if declared) will be payable semi-annually in arrears, on a non-cumulative basis, on the outstanding TFC amount. The first such profit payment will fall due six months from the Issue Date and subsequently every six months thereafter subject to complying with regulatory requirements as stipulated in State Bank of Pakistan BPRD Circular No. 6 dated August 15, 2013. The instrument carries a call option which may be exercised after Jun-23 (5 years), subject to approval of the SBP.

Jan-26

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