The Pakistan Credit Rating Agency Limited
Press Release


Muhammad Noor Ul Haq

Applicable Criteria

Related Research

This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA

PACRA Assigns Initial Rating to Bank Alfalah Ltd. | TFCs | Series A

Rating Type Debt Instrument
(16-Feb-21 )
Action Initial
Long Term AAA
Short Term -
Outlook Stable
Rating Watch -

The rating of TFCs reflects the supreme security structure of Instrument. The Instrument is secured through lien over GoP issued securities – 10 years PIBs. The maturity of the securities is higher than the maturity of Instrument. The securities marked under lien are 105% of the issue, reflecting comprehensive coverage including any unforeseen fluctuation in prices. The Securities are placed in BAFL SGL account maintained with the State Bank of Pakistan. The Bank has entity ratings of “AA+/A1+” which reflects its strong positioning in the market. With this issuance, the bond market is expected to take a positive connection. The Bank is well positioned to benefit from the ensuing advantages. The Bank’s ratings take comfort from its diversified loan book which is maintained at a notable level; along with healthy CAR. The mix of deposits improved as the Bank added a few percentage points to the CA portion in the CASA mix. BAFL has a sound foothold with a considerable presence across the country, enabling its deposit base growth. The Bank has sustained good profit base. Overall infection ratio remained at the lower edge. The rating draws comfort from the Bank's stable ownership, experienced management team, prudent risk management policies and distinct emphasis on sustaining the position. Covid-19 pandemic has posed challenges to the banking sector, almost all segments of the economy, worldwide and domestically, are impacted. The ramifications would continue to unfold, warranting vigilance and timely actions where needed. The Bank has also formed a board level Corona Crisis Management Committee in order to formulate future strategies for diminishing the financial and business risks.
Maintaining Bank's capitalization backed by strong sponsors and adding granularity to its advances and deposits book are essential. Continued effective management of spreads remains important, meanwhile, holding the asset quality is a pre-requisite.

About the Entity
Bank Alfalah Limited has a network of 686 branches and 24 sub-branches, at end-Sep20. Main sponsor Abu Dhabi Group (ADG), comprises some of the prominent members of UAE's ruling family and leading businessmen of UAE, continues to own majority stake (49.03% at end-Sep20). At present, BAFL's BoD comprises eight members including President & CEO and seven Non-Executive Directors; four are representatives of ADG, one represents IFC, while two are independent. The CEO & President, Mr. Atif Bajwa, carries extensive international experience spanning 37 years of executive leadership roles in banking.

About the Instrument
The Bank has planned for the issuance of Rated, Secured, Listed, Redeemable Term Finance Certificates (TFCs), having total approved Issue Size of up to PKR 50bln. Issue size of current tranche Series A is PKR 11bln. The tenor of Series A is 3 years where rate is 9.03% per annum. Profit is payable semi-annually in arrears on the outstanding principal amount, based on 365 days a year and on non-cumulative basis. The first coupon profit payment will fall due six months from issue date (i.e. January15, 2021) and subsequently every six months thereafter. Interim Coupon Payment shall be equal to profit on investment amounts invested by each investor from date on which such investment amounts are received by Issuer until the date which is one day prior to Issue Date.

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.