The Pakistan Credit Rating Agency Limited
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Usama Liaquat

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PACRA Maintains Ratings of Bank Alfalah Limited | TFC V | Feb-13

Rating Type Debt Instrument
Action Maintain Maintain
Long Term AA AA
Short Term - -
Outlook Stable Stable
Rating Watch - -

The rating reflects the bank's sustained performance, good asset quality, strong financial profile and healthy liquidity. The bank has solidified its relative positioning in the universe of large sized banks by improving its market share. The bank's advances maintained at a healthy level, resulting in a good ADR of ~67%, which is on the higher end among large banks. The mix of deposits improved as the bank added a few percentage points to the CA part in the CASA mix. Resultantly, BAFL's cost of funds is comparable to some of the large banks. The Bank has a sound foothold with a considerable presence across the country which has enabled its deposit base to sustain. Operating cost structure has improved on YoY basis on account of cost rationalization. The Bank saw healthy maintenance in its profitability. Overall infection ratio remained stable. Effective implementation of the envisaged business strategy has played an important role in business growth. The increasing asset yield and cost efficiency enabled spreads to increase. Investment yield has a notable improvement.
The rating draws comfort from the bank's experienced management team, prudent risk management policies and deep rooted relationship with clients - borrowers as well as depositors. The bank issued Tier-I instrument, augmenting the bank's CAR and providing room for growth.
The rating is dependent on the bank's sustained risk profile. The equity base of the bank and CAR are satisfactory and may continually be enhanced in view of the expected growth in loans. Augmentation of the Bank's capitalization backed by strong sponsors and adding granularity to its advances and deposits book are essential. The effective management of spreads remains important, meanwhile, holding the asset quality is a pre-requisite.

About the Entity
Bank Alfalah Limited (BAFL) has a network of 648 branches, at end-Sep19, including 155 Islamic banking branches - one of the most extensive network by any conventional bank. Abu Dhabi Group (ADG), comprising some of the prominent members of UAE's ruling family and leading businessmen of UAE, continues to own majority stake (~50% at end-Sep19) in the bank.
The nine-member BoD comprises President & CEO and eight Non Executive Directors, four of whom are representatives of ADG, one represents IFC, while three are independent. Mr. Nauman Ansari is the president of the bank. He carries extensive experience in the banking industry. A team of experienced professionals assist the CEO.

About the Instrument
Subordinated loan (TFC V Unsecured) with an issue size of PKR 5 bln was issued in Feb13. Tenor of the instrument is eight years (Feb21) with a profit rate of 6M-KIBOR plus 125bps, payable semi-annually. 0.30% of the principal will be repaid in the first 90 months and remaining principal of 99.70% at maturity in the 96th month.

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.