The Pakistan Credit Rating Agency Limited
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Ahmad Saad Siddiqi

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PACRA Maintains Entity Ratings of Habib Metropolitan Bank Limited

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

The ratings of Habib Metropolitan Bank (HabibMetro) is vested in the brand strength of the Bank, flanked by a family of astute bankers. The Bank is also associated with a diversified and financially strong international bank - Habib Bank AG Zurich (HBZ). This association helps in assimilating the parent's best practices into HabibMetro, while fostering control environment with enhanced level of oversight. The Bank has a formidable presence in the trade business of Pakistan. The benefits continue to accrue in terms of non-markup income. The Bank has a strong forte in the business hub of Pakistan in terms of its presence and contribution of deposits and advances. The Bank grew its customers deposit base by 19.5%, wherein it enhanced its current account deposits by 25.7%, higher than the sector's growth. The Bank continues to remain focused on improving its deposit mix. The Bank’s emphasis in terms of its loan portfolio is evident by the growth of 18.6% in net advances, led by its presence in textile and commodity finance segments. Overall infection ratio improved to 5.8% (CY19: 6.2%). Due to the re-alignment of interest rate regime in Pakistan as well as improved current account deposits, HMBL’s cost of funds declined, resulting in a reduced markup expensed. This progress, coupled with the increase in markup income from advances and investments, resulted in the growth in profitability. As at December 31, 2020 the Bank’s CAR is 16.79%. The Tier 1 CAR increased from 14.06% in 2019 to 15.16% in 2020. 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 management's ability to augment its position generally in the banking industry and particularly in its market niche - trade finance in the wake of rising competition. Any weakening in asset quality will in turn put pressure on the bank's profitability and risk absorption capacity.

About the Entity
HabibMetro, commencing operations in 1992, is listed on Pakistan Stock Exchange. The bank is a 51% owned subsidiary of HBZ. HBZ, incorporated in Switzerland in 1967, is owned and managed by the Habib family. HabibMetro makes substantial contribution towards consolidated assets of Habib Bank AG Zurich. HabibMetro has a nationwide network of 445 branches including 34 Islamic branches, spread over 161 cities. The nine member board comprises CEO along with two representatives of HBZ, three independent directors and three non-executive directors. The CEO, Mr. Mohsin Nathani, carries experience of over 30 years in domestic and international banking industry. A professional team of senior executives assists the Chief Executive.

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.