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 Maintains Entity Ratings of Allied Bank Limited

Rating Type Entity
(23-Jun-21 )
(30-Jun-20 )
Action Maintain Maintain
Long Term AAA AAA
Short Term A1+ A1+
Outlook Stable Stable
Rating Watch - -

Allied Bank Limited’s franchise, spread over a network of 1,402 branches, has enabled sustainable footprints into the country’s deposit base. The Bank’s risk absorption capacity, as reflected in its sound equity base, has grown over the years. Another reflection of this is ABL's significantly robust CAR (25.2% as at Dec20), beyond the industry average. While ABL has realistic approach towards lending, increased attention is being diverted towards deepening of current business relationships. An enduring emphasis is laid on building trade business. Also, more diversification is being planned to be achieved by enhancing portfolio in consumer, housing finance and auto loans. The Bank’s technology platform is a strength. This has facilitated fast and effective decision making while extending quality counter Banking and e-Banking services to its customers, additionally this also has enabled itself to operate with high efficiency and capacity even in current pandemic situation. The related benefits would continue to unfold over the years. A more focused digital drive is one of the pillars of the envisaged strategy. In order to encourage seamless flow of payments transaction between consumers and merchants through digital channels ABL launched NIFT ePay, a domestic e-commerce gateway service launched by National Institutional Facilitation Technologies under “Digital Financial Services Platform” with a focus to re-align digital transformation and augment e-Banking ecosystem in the Country. Ratings also reflect strong financial profile as evident from robust liquidity, and sound asset quality indicators. The ratings recognize the management's concerted efforts in sustaining the sound asset quality, which covered the high advances concentration comparatively to financially sound groups; ensuring that aggregate risks are within the Bank’s overall risk acceptance limits. The low infection ratio and good coverage ratio are considered positive. The continued strengthening in retail deposit market would enable further improvement in deposit granularity in terms of concentration as well as funding cost as CA has reported significant growth during the year. The market share needs to be harnessed. At the same time, achieving efficiency in terms of utilization of its healthy CAR may help in further boosting ABL’s market share and profitability. Going forward, enhanced focus on digitalization and process automation to enhance efficiency and reduce cost, would augment the banking’s risk profile.
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. Continued focus on strengthening its credit review procedures as exhibited earlier is required as the loan repayment cycle remains stretched amid variants of the pandemic continue to re-emerge.
The management’s ongoing concerted efforts towards enhancing diversification in its revenue stream, achieving reduction in overall concentration, higher penetration in retail deposits and continuous improvement in cost structure remain important.

About the Entity
ABL is a large sized Bank with a system share of ~6.8% as at end-Dec20 in the total deposits of the industry. Ibrahim Group (IG), through Ibrahim Holdings Pvt. Limited, owns ~85% of shareholding in ABL. Apart from interest in financial sector; IG is also engaged in manufacturing of polyester and yarn. ABL has a growing subsidiary - ABL Asset Management Company (AUM close to PKR 77bln at end-Mar21). The eight members BoD include the CEO, three sponsoring directors, three independent directors and one non-executive director. Mr. Aizid Razzaq Gill, associated with ABL for the last fifteen years, has been designated as the CEO since Jan-21.

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.