PACRA Assigns Preliminary Rating to Bank Alfalah Limited - PPTFC Tier 2 - PKR 20bln - TBI

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. The Bank's capital position is sound and will be further reinforced through the current Tier II issuance.

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 diversified 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
Bank Alfalah Limited is issuing unsecured, privately placed/DSLR-listed, rated, and subordinated Tier II Term Finance Certificates (“TFC”) of up to PKR 20bln, including a PKR 10bln Green Shoe Option. Structured under the Companies Act, 2017 and SBP’s Basel III Capital Rules, the instrument carries a ten-year tenor with bullet repayment at maturity and a floating profit rate of 6M KIBOR plus 100bps, payable semi-annually. A call option is exercisable after five years, subject to SBP approval, while no put option exists. Payments may be restricted upon breach of regulatory capital requirements. Upon a Point of Non-Viability event, SBP may direct conversion into ordinary shares and/or write-off, capped at 400mln shares. The instrument is subordinated to all existing indebtedness, including deposits, ranks senior to current ADT-I TFC issues, and pari passu with future Tier II issuances (if any). Proceeds will support BAFL’s capital position and operations.