PACRA Maintains Rating of Askari Bank Limited | TFC VI (Additional Tier I) | July-18
|Rating Type||Debt Instrument|
The bank has a strong brand image, flanked by its affiliation with one of the strongest conglomerate, Fauji Foundation Group. This represents strong ownership of the bank. This association has provided fruits in terms of market penetration, customer confidence, sustainable funding sources and avenues for generating mark-up and non-mark-up based income stream. Askari Bank has shown a stable growth rate over the years as evident by a significant increase of 54% in profit after tax in CY20. Volumetric increase in earning assets, led by investments provided support to profitability. CY20 proved to be a very prosperous year for the Bank in terms of both PBT and PAT. The net spread has increased on the back of lower cost of funds. The Bank increased its customer deposits by 16.2% to hold its market share intact at 4.7% (CY19: 4.7%). A noticeable rise is seen in both CA and SA, ultimately boosting CASA by a decent margin. In CY20, AKBL’s gross advances grew by 6.2% YoY and asset quality improved as the infection ratio decreased to 6.7% (CY19: 7.1%). The Bank's CAR stood at 15.5% at end-Dec20 were Tier 1 capital enhanced to 12.3%. The Bank has issued tier-II TFC of PKR 6bln which has enhanced its capital base, thereby boosting its lending capacity. COVID-19 is an ongoing challenge. While it has taken a toll on many businesses, its ramifications are still unfolding. The proactive measures are taken by the regulators and other concerning bodies have mitigated the potential damages much anticipated from this pandemic. As a result, the banking industry remained protected and in fact posted record profits. Vigilance is required as the loan repayment cycle remains amid variants of the pandemic continue to re-emerge.
The ratings are dependent upon the sustainability of the bank's relative positioning. The equity base of the Bank and CAR are satisfactory and may continually be enhanced. Meanwhile, holding the asset quality is a prerequisite.
Askari Bank Limited, incorporated in 1991, operates with a network of 537 branches as at end- Dec20. The banks share in total customer deposits stood at 4.7% at end-Dec20. Fauji Foundation (FF) is the key sponsor (~71.9% stake). The remaining shareholding is widely spread. Currently, overall control of the Bank vests in the eleven-member Board of Directors (BoD) including the President and CE. Five of the board members are Fauji Foundation nominees; four are independent members, while one represents NIT. Mr Abid Sattar is the President & CE of Askari Bank Limited. He is a seasoned banker with rich industry experience spanning over three decades. His term will expire on Aug 08, 2021. The bank will disclose the detail of the appointment of the new or acting CEO in accordance with the statutory requirement.
AKBL issued a TFC-VI (Additional Tier 1) in July 2018 amounting to PKR 6bln(inclusive of a greenshoe option of PKR 1.5bln) to boost its CAR. The TFC is an Over the Counter (OTC), listed, unsecured, subordinated, perpetual and non-cumulative instrument. It has a profit rate of 6 Month KIBOR + 1.5% and is being paid semi-annually in arrears on the outstanding principal amount. The instrument also carries a call option which may be exercised on or after Jun-23, subject to the approval of the SBP.