The Pakistan Credit Rating Agency Limited
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Sehar Fatima

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PACRA Upgrades Entity Ratings of Bank AL Habib Limited

Rating Type Entity
(26-Jun-21 )
(29-Jun-20 )
Action Upgrade Maintain
Long Term AAA AA+
Short Term A1+ A1+
Outlook Stable Stable
Rating Watch - -

Bank AL Habib has been portraying a history of stable and consistent growth for more than quarter of a century. The Bank achieved over 5% of system share of customer deposits back in 2015. Ever since that period, an added impetus to growth trajectory was noted. The hallmark of this growth progression has been prudence. The Bank weathered cyclical volatilities unfolding in the economy. 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 has solidified its relative positioning in the universe of large sized banks by further augmenting its market share in terms of customer deposit base. The Bank’s customer deposits posted a growth of 22%, higher than the sector’s growth, to cross one trillion mark (CY20: PKR 1,083bln: CY19: PKR 890bln). The strength of the Bank is reflected in the high proportion of retail deposits in the total. Hence, concentration is low along with reduced risk. The Bank continued with its strategy for outreach expansion - adding significant branches every year. Cost to total income declined during the year. Exceptional asset quality - lowest in industry, maintained for last many years is reflective of the 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. The Bank's CAR improved to 15.1% as at end Dec-20, providing the Bank with a healthy cushion to expand its advances book. COVID-19 is an ongoing challenge. While it has taken a toll on many businesses, its ramifications are still unfolding. The proactive measures taken by the regulators and other concerned bodies have mitigated the potential damages anticipated from this pandemic. As a result, the banking industry remained protected and in fact posted record profits. Vigilance is required as variants of the pandemic continue to re-emerge.
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 acquirer business.

About the Entity
BAHL, incorporated in Oct 1991, operates with a network of 850 branches /sub-branches, including 106 Islamic banking branches at end-Dec-20. The Bank has a vast ATM network of 1090 (including about 176 offsite ATMs) and 7 Mobile vans. The sponsors of BAHL are members of the Habib family - one of the oldest and 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.

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.