PACRA Maintains Instrument Rating of AlBaraka Bank (Pakistan) Limited | Sukuk | Sep-14
|Rating Type||Debt Instrument|
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 from low cost deposits. 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. Post merger, increased operational efficiency and branch level synergies are starting to pay dividends in the form of increasing profitability. The Mar-end 2019 results are a reflection of this.
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 maintaining profitability and hence generation of internal capital. As at Mar-19, overall CAR of the Bank is reported at 11.95% which meets the regulatory requirement. Internal profit generation has improved, sponsors had injected USD 10mln in Dec-18 to support CAR requirement with commitment to inject further amount on need basis. Improving diversification in revenue streams, particularly from non-fund based avenues and maintaining healthy asset quality are important for bottom-line performance.
ABPL is currently operating with a network of 191 branches (end-Mar19). 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.
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. ABPL 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.