|  | 


VIS Reaffirms Instrument Rating of Askari Bank Limited

Karachi, June 30, 2020 (PPI-OT): VIS Credit Rating Company Limited (VIS) has re-affirmed the rating assigned to Tier-II instrument of Askari Bank Limited’s (AKBL)- 5th (fifth) issue of Term Finance Certificate (TFC-V) at ‘AA-’ (Double A Minus). The long-term rating of ‘AA-’ signifies high credit quality, while protection factors are considered strong. Risk is modest but may vary slightly from time to time because of economic conditions. Outlook on the assigned rating is ‘Stable’. The previous rating action was announced on June 26, 2019.

The assigned rating takes into AKBL’s association with its primary shareholder, Fauji Foundation Group, a diversified conglomerate with strong financial muscle and presence in various sectors of the country. Operating as a mid-tier bank in Pakistan, AKBL enjoys a moderate and sustained market share in terms of domestic banking deposits and advances. Risk profile of the institution is supported by sound liquidity indicators. While capitalization and efficiency indicators have shown an improving trend on a timeline basis, further improvement in CAR and efficiency would be important over the rating horizon.

The bank witnessed a selective growth in loan portfolio amidst economic slowdown. Corporate and Commercial portfolio remained the main driver towards credit expansion, contributing more than four-fifth to the advances book at end-FY19. Asset quality indicators remained largely intact, though provisioning coverage has trended downward. The current pandemic and resultant lockdowns have impacted the macro-economic environment, implying potentially higher credit risk and liquidity constraints. In the wake of prevalent circumstances, the bank is closely monitoring the evolving situation and will initiate due measures to mitigate the risk of potential defaults.

The bank maintained its high exposure to government securities in total investment mix. Thereby, credit risk originating from investment portfolio is largely considered manageable. With the decrease in discount rate, deficit on government securities held as available for sales has been converted into a surplus by end-1QFY20. The increase in non-government debt securities was primarily related to instruments floated by high rated entities. Albeit, listed equities comprised a relatively small proportion of the bank’s equity base and major exposure was taken in blue chip companies, the bank remains exposed to market risk in a highly volatile stock market.

The bank sustained its deposit concentration and low-cost deposit base while maintaining adequate liquid assets in relation to deposits and borrowings on a timeline basis. Profitability of the bank improved during the outgoing year, supported mainly by volume expansion, higher fee-based income and better efficiency. Profit retention, and issuance tier-II sub-ordinated debt in March’20, supported capital adequacy of the bank.

For more information, contact:
Director Compliance and Rating Analytics,
VIS Credit Rating Company Limited
VIS House, 128/C, 25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi, Pakistan
Tel: +92-21-35311861-72
Fax: +92-21-35311873
Email: bilal@jcrvis.com.pk
Website: https://www.vis.com.pk/