The Pakistan Credit Rating Agency Limited
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Ahmad Saad Siddiqi

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PACRA Maintains Entity Ratings of Bank Alfalah 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 reflect the bank's sustained performance, good asset quality, strong financial profile and healthy liquidity. The bank has maintained its position as one of the large banks, in terms of market share. The bank's advances have been maintained at a notable level, resulting in a distinguished ADR of 65.5%, which is the highest among the universe of large banks. This reflects the bank’s overall strategic philosophy and its growth trajectory. The bank has a balanced presence in various segments and intends to further fortify its position in SME and consumer markets. The bank has a forthcoming strategy towards SME and has made headwinds in this arena. Overall infection ratio has largely remained the same. The mix of deposits improved as the bank added a few percentage points in the CASA mix; both CA and SA witnessed improvement. In terms of CA, the bank already has a distinct position among the leading banks. In line with the industry, BAFL's cost of funds also declined during 2020, which is attributed to the re-alignment of interest rate regime in Pakistan. Being customer centric Bank with focus towards technological advancement, BAFL has a sound foothold with a considerable presence across the country - enabling its deposit base growth. PAT of the bank witnessed a decline of 17.5% in CY20, on the back of general provision recorded against restructured loans for COVID-19 relief scheme to mitigate credit risk. Effective implementation of the envisaged long term business strategy has played an important role in business growth. The rating draws comfort from the bank's stable ownership, experienced management team, prudent risk management policies and distinct emphasis on sustaining the position. 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 bank has also formed a board level Corona Crisis Management Committee in order to formulate future strategies for diminishing the financial and business risks.
The rating is dependent on the bank's sustained risk profile. The equity base of the bank and CAR are satisfactory and expected to remain the same in view of the uncertainties prevailing due to COVID-19. Augmentation of the Bank's capitalization supported by strong sponsors and adding granularity to its advances and deposits book are essential. Continued effective management of spreads remains important, meanwhile, holding the asset quality is a pre-requisite.

About the Entity
Bank Alfalah Limited (BAFL) has a network of 730 branches, at end-Dec20, across more than 200 cities in the country. Main sponsor Abu Dhabi Group (ADG), comprises some of the prominent members of UAE's ruling family and leading businessmen of UAE, continues to own majority stake (~49.03% at end-Dec20) in the bank.
At present, BAFL's BoD comprises eight members including President & CEO and seven Non-Executive Directors, of which four of whom are representatives of ADG, while three are independent. Mr. Atif Bajwa is the President & CEO of the Bank. He carries extensive international career experience spanning 38 years of executive leadership roles in banking.

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.