PACRA Maintains the Ratings of Bank Alfalah Limited | Additional Tier 1 TFC | 7bln

The rating reflects Bank Alfalah's ("BAFL" or "The Bank") enduring commitment to building a resilient and diversified commercial banking franchise across Pakistan. Backed by a strong sponsor group, the Bank has steadily expanded its footprint to 1,186 branches as of CY25, while deepening its digital banking capabilities, with reported throughput reaching PKR 9.0 trillion as of CY25, reflecting meaningful traction in technology and customer related investments. The Bank has demonstrated a consistent upward trajectory over the past several years, underpinned by disciplined liability management, a strengthening CASA franchise, and diversified revenue streams, while sustaining its credit profile and competitive position. The Bank's deposits increased to PKR 2,496bln as of CY25 (CY24: PKR 2,136bln), with deposit share expanding progressively, and remained steady at PKR 2,471 bln by 1QCY26. The CASA ratio stood at 69.5% as of CY25, improving to 70.8% by 1QCY26, reflecting a structurally strengthening current account base that meaningfully reduces the Bank's cost of funds. Net advances stood at PKR 1,105bln (CY24: PKR 1,109bln), rationalised to PKR 1,029bln in 1QCY26, with the infection ratio maintained at a controlled 4.1%, supported by near-full provisioning coverage of Stage III advances. Capital Adequacy Ratio was recorded at 15.87% (CY24: 17.96%), improving further to 16.22% in 1QCY26, comfortably above SBP's prescribed minimum threshold. During CY25, profit after tax stood at PKR 28.3bln (CY24: PKR 38.3bln), with the variance primarily attributable to elevated operating expenses driven by network expansion, technology investments, and higher marketing and branding costs. Profitability momentum strengthened in 1QCY26, with PAT rising to PKR 11.1bln (1QCY25: PKR 7.0bln), translating into an annualised return on equity of 23.1%.
Going forward, elevated policy rates may exert pressure on borrowing costs and private sector credit demand. The ratings remain contingent on the Bank's ability to preserve credit discipline, sustain CASA momentum, and manage net interest margin dynamics.

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.

About the Instrument
The Bank issued Additional Tier-I Term Finance Certificates (“TFCs”) amounting to PKR 7 billion. The instrument is privately placed, listed, unsecured, subordinated, perpetual, non-cumulative, and contingent convertible. It contributes to the Bank’s Capital Adequacy Ratio (CAR) by strengthening Additional Tier-I Capital in line with SBP guidelines. Mark-up is payable semi-annually in arrears at 6-month KIBOR + 1.5% on the outstanding principal. The TFCs may be recalled and replaced with similar or higher-quality capital, subject to SBP approval, five years after the issue date or thereafter, in accordance with the call option terms. As per lock-in clause requirement, neither profit nor principal would be payable (even at maturity), if such payment will result in a shortfall in Bank's minimum capital requirement (MCR), leverage ratio (LR) or CAR or results in an increase in any existing shortfall in MCR, LR or CAR. The TFC is subject to a loss absorbency clause, which upon the occurrence of Non-Viability event, SBP may fully or permanently convert the TFCs into common shares of the Bank.