The Pakistan Credit Rating Agency Limited
Press Release


Sehar Fatima

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 Preliminary Rating to Bank AL Habib Limited Tier-II TFC (TFC-VIII)

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

BAHL is planning to issue a rated, unlisted, unsecured and subordinated TFC-VIII. The issue amount is upto PKR 5bln (inclusive of a Green Shoe option of PKR 2bln) to contribute towards AL Habib's Tier II Capital. The funds so raised would be utilized in the Bank's normal business operations. The tenor of the instrument is upto 10 years. The profit rate is 6M-KIBOR plus 75bps and would be paid semiannually in arrears on the outstanding principal. The instrument is structured to redeem 0.02% of the Issue Amount per semi-annual period in the first nine years and remaining Issue Amount in two equal semi-annual installments of 49.82% each in the tenth year. BAHL may call the TFCs (either partially or in full), with prior approval of SBP, on any profit payment date on or after five years from the date of issue. Bank AL Habib has been portraying a history of stable and consistent growth for more than a quarter of a century. The Bank's superior standing was witnessed in the global financial crisis almost a decade ago. The trend continued to this day. This was reflected in the sound asset quality of the Bank, compared to many medium and large institutions taking a significant hit on their advances book. The rating reflects the Bank's improved performance, exceptional asset quality, satisfactory financial profile and healthy liquidity. The Bank’s customer deposits increased to PKR 1,205bln as at end-Jun21 (end-Dec20: PKR 1,083bln, end-Dec19: PKR 890bln). Exceptional asset quality - lowest infection ratio in industry, maintained for last many years is reflective of Bank's strength. Strong net mark up income was further augmented by enhanced non-mark up income. Trade finance is the Bank's hallmark. 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. As at end-Jun21 the Bank reported CAR of 13.9% (end-Dec20: 15.1%). COVID-19 is an ongoing challenge. The proactive measures taken by the regulators and other concerned bodies have mitigated the potential damage anticipated from this pandemic.
The rating is dependent on the Bank's sustained risk profile. In the wake of heightened competition, profitable growth is a challenge while retaining the relative positioning in the industry. The equity base of the Bank and CAR are satisfactory and may continually be enhanced. The Bank is enhancing its footprints in the broad financial spectrum, which is essential to meet customers' needs. Digital transformation is very important. BAHL is also into the acquirer business.

About the Entity
BAHL, incorporated in Oct 1991, operates with a network of 935 branches/sub-branches, including 128 Islamic banking branches at end-Jun21. The sponsors of BAHL are members of the Habib family – one of the oldest most distinguished names in Pakistan’s banking sector. BAHL’s ten-member BoD includes representatives of Habib family and independent members. Mr. Mansoor Ali Khan, the Bank’s CEO, has been associated with the Bank for more than 25 years. He is backed by a team of experienced professionals, most of whom have long association with the Bank.

About the Instrument
The instrument is unsecured and subordinated as to payment of principal and profit to other indebtedness of the bank, including deposits, but will rank pari passu with other Tier II instruments and superior to Additional Tier 1 instruments. The Instrument is subject to Lock-in Clause which states that neither profit nor principal may be paid if such payments will result in shortfall in the Bank’s Minimum Capital Requirement (“MCR”) or Capital Adequacy Ratio (“CAR”) or Leverage Ratio (“LR”) or increase any existing shortfall in MCR, CAR and LR.

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.