PACRA Upgrades the Entity Ratings of Habib Metropolitan Bank Limited

The upgrade in the rating of Habib Metropolitan Bank Limited ("HabibMetro" or the "Bank") follows a journey of more than a quarter-century at "AA+." The Bank was first assigned this rating in 2001 and has held it since, including through the 2006 merger of the Pakistan branches of Habib Bank AG Zurich (HBZ) into the erstwhile Metropolitan Bank Limited. HBZ holds 51% of HabibMetro's issued share capital and accordingly exercises majority ownership and control. HBZ is licensed and supervised by Switzerland's Financial Market Supervisory Authority (FINMA) under the Swiss Federal Banking Act, establishing a formal and substantive group linkage between HabibMetro and the HBZ Group. As a result, HabibMetro is subject to dual-layer regulatory oversight, primary prudential supervision by the State Bank of Pakistan (SBP) at the local level and consolidated supervision by FINMA at the group level. This structure is a distinct advantage not shared by much of the Bank's current peer universe, and it underpins our assessment of ownership strength, governance oversight, and the propensity and likelihood of group-level support. Since the merger, the parent-subsidiary relationship has benefited both sides, with HBZ and HabibMetro each posting growth across key metrics, including deposits, equity, and profitability. The Bank has demonstrated smooth management transitions, reflecting the strength and continuity of its governance structure. Group-level resources help the Bank assimilate international best practices while benefiting from advancements in information technology, IT infrastructure, risk management, and other key areas. Since first being rated, HabibMetro's credit profile has been tested across multiple economic cycles, demonstrating inbuilt resilience and a strong ability to hold its ground in trade finance, which is its core strength, despite volatility on the external front, particularly in exports. HabibMetro's standalone financial strength remains a key rating consideration. The Bank continues to maintain healthy capitalization, supported by strong internal capital generation and prudent balance sheet management. Asset quality indicators remain sound, while a diversified earning asset base, a robust liquidity profile, and a stable deposit franchise lend resilience to both earnings and funding. The Bank's well-established domestic franchise continues to lead in trade finance, and it has made notable progress in expanding its transaction banking capabilities and digital platform, strengthening customer engagement and competitive positioning. These initiatives, together with its established market presence and stable business profile, further support the assigned ratings. On the financial side, HabibMetro delivered a solid CY25 performance. Total deposits grew 20.8% to PKR 1,119.6bln (CY24: PKR 927.1bln), with the CASA ratio strengthening to 80.1% (CY24: 78.5%). Non-markup income rose 15.1% to PKR 24.5bln (CY24: PKR 21.3bln), driven by strong foreign exchange income, securities gains, and fee-based revenues. Profit Before Tax (PBT) stood at PKR 49.0bln (CY24: PKR 52.7bln), while Profit After Tax (PAT) came in at PKR 22.6bln (CY24: PKR 24.7bln). The Capital Adequacy Ratio (CAR) stood at 17% (CY24: 19.3%), achieved entirely through organic capital generation with no reliance on subordinated debt, distinguishing HabibMetro from many of its peers. The equity base rose to PKR 127.8bln (CY24: PKR 115.0bln), positioning the Bank among the most efficiently run institutions in the sector.
Going forward, the Bank’s ability to preserve its strong domestic franchise and effectively leverage the financial strength, governance framework, and international banking network of HBZ will remain important.

About the Entity
HabibMetro, a subsidiary of HBZ, began operations in 1992 and is listed on the PSX. It significantly contributes to HBZ’s consolidated assets. The Bank's Board of Directors comprises nine members, including five non-executive directors, four representing HBZ, and three independent directors, and one executive director, the CEO. Mr. Mohamedali R. Habib serves as the Chairperson of the Board.