PACRA Maintains Rating of Askari Bank Limited | TFC VI ( Additional Tier I ) | Jul-18

The rating reflects relative positioning of the Bank, driven by AKBL's strong ownership structure whereby Fauji Foundation Group - an established business conglomerate with strong financial muscle - holds majority stake. The Bank has continued the growth trajectory during 2018. The cost of funding has witnessed reduction over a longer horizon due to growth in low cost deposits. The profitability in the banking sector is a challenge due to maturity of high yielding PIBs. Volumetric increase in earning assets, led by loan portfolio augmentation, provided support to profitability; along with constant flow of recoveries and reversals. Last expansion in branch network led to increase in expenses, yet benefit can be seen in the form of deposit growth. Meanwhile, noticeable improvement was observed in asset quality as net accretion to NPLs curtailed and is supplemented by comfortable liquidity position. The Bank's CAR is 13.9% at end-Sep18. Going forward, the management is eyeing CPEC as an opportunity to capitalize and build its business through its dedicated China Desk and Representative Office in China. This would be supported by extending outreach and on-going focus on generating non-funded income and mobilizing low-cost deposits.
The ratings are dependent upon continuous improvement in asset quality, whereas, effective management of spreads remains important. Meanwhile, a continuous watch on capital adequacy is a pre-requisite.

About the Entity
Askari Bank Limited, incorporated in 1991, operates with a network of 516 branches (at end-Mar18). The banks share in total customer deposits stood at 4.5% at end-Sep18. With change in ownership in 2013, Fauji Foundation (FF) emerged as the key sponsor (~71.9% stake). The remaining shareholding is widely spread.
The overall control vests in an eleven-member board of directors including the President. Five members represent FF, four are independent, while one is NIT nominee. The BoDs during June 2018 appointed Mr. Abid Sattar as the new President and CE of Askari Bank Limited. He is a seasoned banker with rich industry experience spanning over three decades.