The Pakistan Credit Rating Agency Limited
Press Release


Muhammad Obaid

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PACRA Maintains Entity Ratings of AlBaraka Bank (Pakistan) Limited

Rating Type Entity
Action Maintain Maintain
Long Term A A
Short Term A1 A1
Outlook Stable Positive
Rating Watch - -

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 lower cost of deposit as ABPL shed high-cost deposits and enhanced contribution of CASA. A sizeable book of GoP securities in the investment portfolio helped 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 Mar-18, overall CAR of the Bank is reported at 10.02% which is below the regulatory requirement, and to address this sponsors are willing to inject $20mln as ADT-I, modality of which is in approval stage. 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-Dec17). 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.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.