PACRA Maintain the Entity Ratings of Bank Alfalah Limited

Bank Alfalah Limited's ("BAFL" or "the Bank") credit profile is anchored by its strong domestic franchise, diversified revenue base, prudent risk management framework, and sustained investment in digital and operational capabilities. The assigned ratings reflect the Bank's systemic importance, sound funding and liquidity profile, resilient asset quality, experienced management, and demonstrated shareholder support. BAFL maintains a meaningful presence across trade finance, transaction banking, remittances, consumer finance, SME banking, and wealth management, supporting earnings diversification. Franchise strength is evidenced by a sizeable, well-distributed deposit base, which grew 16.8% to PKR 2.496 trln (CY24: PKR 2.136 trln), driven by customer acquisition, transaction banking relationships, and deeper retail and commercial penetration. Although the CASA ratio moderated to 69.5% (CY24: 77.1%) amid competitive deposit repricing dynamics and evolving customer asset-allocation preferences in a declining interest rate environment, the Bank’s strategy remains firmly anchored on building average balances especially CA. The balance sheet remained resilient, with total assets rising to PKR 3.83 trln (CY24: PKR 3.71 trln). The investment portfolio expanded 9.2% to PKR 2.173 trln, as the Bank maintained a conservative liquidity stance through greater deployment into sovereign and low-risk instruments, providing a buffer against market and funding stresses. The Bank's digital transformation agenda continues to strengthen customer engagement and operational efficiency. During CY25, the branch network expanded to 1,186 locations, the customer base surpassed 9 million, and digital transaction volumes reached approximately PKR 9.0 trln, reflecting growing ecosystem adoption and reinforcing competitive positioning. Despite a materially softer interest-rate environment, revenue-generating capacity remained resilient. Total revenues grew 7.1% to PKR 183.4 billion (CY24: PKR 171.2 billion), supported by healthy non-funded income growth across foreign exchange, trade finance, transaction banking, cards, wealth management, and investment banking. Cross-border banking momentum was notable, with trade volumes and home remittance flows increasing approximately 20% and 9%, respectively. Gross advances remained broadly stable at PKR 1.153 trln, reflecting disciplined underwriting and portfolio optimization following the withdrawal of ADR-linked tax incentives, while healthy Consumer, SME, and Agriculture segment growth supported diversification. Asset quality indicators remain satisfactory. The infection ratio edged up to 4.1% (CY24: 3.7%); however, NPL coverage exceeded 100%, underscoring conservative provisioning practices and strong loss-absorption capacity. Profit after tax moderated to PKR 28.3 billion (CY24: PKR 38.3 billion), primarily reflecting lower benchmark rates and higher operating expenses linked to network expansion, inflation, technology investments, and home remittance promotional activity. Nonetheless, earnings generation remained adequate to support internal capital formation. Capitalization continues to underpin the ratings, with the Capital Adequacy Ratio at 15.87% (CY24: 17.96%), comfortably above regulatory minimums. The planned Tier-II TFC issuance is expected to further strengthen capital buffers and support future growth.
The ratings remain dependent upon BAFL's ability to maintain its financial profile, asset quality, capitalization, and earnings generation. Any significant deterioration in these indicators may impact the assigned ratings.

About the Entity
Bank Alfalah is majority owned by the Abu Dhabi Group (the Group - sponsors of the Bank based in Abu Dhabi, UAE), which holds a 55.61% stake in the Bank, while the remaining shareholding is divided among institutional and individual investors. The Group comprises prominent members of the UAE ruling family and leading businessmen with diversified global investments, providing strong sponsor support and strategic stability to the Bank. The Bank benefits from an experienced leadership team led by Atif Bajwa, who possesses over four decades of banking experience.