The Pakistan Credit Rating Agency Limited
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Muhammad Noor Ul Haq

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PACRA Maintains Entity Ratings of Faysal Bank Limited

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

The ratings take comfort from the Faysal Bank Limited's (FABL) association with a foreign business group – (Dar Al-Maal Al Islami Trust). The presence of sponsor’s nominees on the Board stands to provide it with the industry-specific working knowledge and strategic thinking capability. The Bank has also benefited from management stability over the past several years. FABL continued its focus on growth while maintaining its relative positioning among peer banks. The Bank has an enduring emphasis on CASA deposits, prudent deployment of assets for better yields and carefully planned loan book growth. The Bank has a continued focus on operational efficiency and despite an increase in its branch network, the Bank was able to keep costs under control. These initiatives have supported the Bank’s profitability and provided a cushion against risk absorption capacity. The management is cognizant of dynamic competition in the industry and is taking steps to strengthen FABL's positioning amongst medium-sized banks operating in Pakistan. FABL's conversion into Islamic banking is a medium-term plan, which is being rolled out as envisaged. FABL opened 21 new Islamic branches during CY20 increasing the Islamic branch network to 500 branches including 1 Islamic sub-branch, making it the biggest network of dedicated Islamic Branches amongst all conventional banks in Pakistan. Moreover, the Bank has launched the first ever Tawaruq based Islamic Credit Card to target a large unserved customer base. FABL remains a highly capitalized commercial bank with a common equity tier 1 (CET-1) ratio of 15.9% as at Dec-20.
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 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 on the Bank's ability to sustain improvement in its financial profile. This is important since most peer banks have gained in terms of their size and profitability matrix in recent years. Any material weakening in asset quality, in turn, putting pressure on the Bank's profitability and risk absorption capacity may have negative implications for the ratings.

About the Entity
FABL, operating with a network of 575 branches, holds ~3.1% share in total banking deposits at Dec-20. Bahrain based IB Bank B.S.C (closed) is the parent company of the Bank holding directly and indirectly 66.78% of FABLs shareholding. Ithmaar Holdings B.S.C. and its subsidiaries are engaged in a wide range of financial services including retail, commercial, investment banking, private banking, takaful and real estate development.
The eleven-member BoD, including the Chairman, comprises a mix of experienced bankers and businessmen having domestic and international experience. Mr. Yousaf Hussain, the CEO & President since May 2017, is an experienced banker with over 26 years of experience primarily with ABN AMRO and the last 12 years with Faysal Bank and is supported by an experienced and qualified team.

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.