The Pakistan Credit Rating Agency Limited
Press Release


Muhammad Obaid

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PACRA Maintains Debt Instrument Ratings of AlBaraka Bank (Pakistan) Limited | Sukuk | Sep-14

Rating Type Debt Instrument
Action Maintain Harmonize
Long Term A- A-
Short Term - -
Outlook Stable Stable
Rating Watch Yes -

The ratings reflect ABPL's association with AlBaraka Banking Group – a strong Middle Eastern banking institution. ABPL witnessed improvement in net spread on account of increasing interest rate environment and enhanced contribution of CASA. A sizeable book of GoP securities in the investment portfolio helped in maintaining adequate liquidity. Going forward, the management aims low cost deposit mix and cautious credit growth, in turn, better profits. Success in planned initiatives is crucial.
Effective implementation of business strategy, particularly in the back drop of challenging operating environment and competitive banking landscape, is important. Pivotal to this strategy is achieving profitability and hence generation of internal capital. As at Sep-18, overall CAR of the Bank is reported at 10.03% which is below the regulatory requirement, and to address this sponsors are willing to inject $10mln as ADT-I. This is expected to provide breathing space to the Bank. Moreover, improving diversification in revenue streams, particularly from non-fund based avenues and maintaining healthy asset quality are important for bottom-line performance.

About the Entity
ABPL is currently operating with a network of 188 branches (end-Sep18). AlBaraka Islamic Bank B.S.C., Bahrain the majority shareholder (~59%) in ABPL, is a subsidiary (91%) of AlBaraka Banking Group (ABG). The Board constitutes six representatives of sponsoring groups and four independent directors. Mr. Ahmed Shuja Kidwai - the CEO - is a professional banker having a long association with ABG. Mr. Nadeem Amjad Khan is Deputy CEO; he has been with the group for the last two decades. The management team comprises experienced professionals.

About the Instrument
ABPL issued an unsecured, subordinated, and listed Sukuk of PKR 2,000mln in Sep-14 to enhance cushion in capital adequacy. Profit rate is based on 6M-KIBOR plus 125bps p.a. and scheduled principal payments are payable semi-annually in arrears. AKBL retains the call option on the instrument, which may be exercised, in part or full, after five years (Aug-19) of issue, subject to SBP's approval.

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