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Lahore, December 30, 2019 (PPI-OT): The rating reflects the bank’s sustained performance, good asset quality, strong financial profile and healthy liquidity. The bank has solidified its relative positioning in the universe of large sized banks by improving its market share. The bank’s advances maintained at a healthy level, resulting in a good ADR of ~67%, which is on the higher end among large banks. The mix of deposits improved as the bank added a few percentage points to the CA part in the CASA mix.
Resultantly, BAFL’s cost of funds is comparable to some of the large banks. The Bank has a sound foothold with a considerable presence across the country which has enabled its deposit base to sustain. Operating cost structure has improved on YoY basis on account of cost rationalization. The Bank saw healthy maintenance in its profitability. Overall infection ratio remained stable. Effective implementation of the envisaged business strategy is important. The increasing asset yield and cost efficiency enabled spreads to increase. Investment yield has a notable improvement.
The rating draws comfort from the bank’s experienced management team, prudent risk management policies and deep rooted relationship with clients – borrowers as well as depositors. The bank has issued Tier-I instrument, augmenting the bank’s CAR and providing room for growth, whereas, enhancing Tier-II capital through issue of a new instrument is also an option, which the Bank can continue to avail from time to time.
The rating is dependent on the bank’s sustained risk profile. In the wake of heightened competition, profitable growth is a challenge while retaining the relative positioning in the industry. The equity base of the bank and CAR are satisfactory and may continually be enhanced in view of the expected growth in loans. Augmentation of the Bank’s capitalization backed by strong sponsors and adding granularity to its advances and deposits book are essential. The effective management of spreads remains important, meanwhile, holding the asset quality is a pre-requisite.
For more information, contact:
Analyst,
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore – Pakistan
Tel: +92-42-5869504-6
Fax: +92-42-5830425
Email: hammad.rashid@pacra.com
Website: www.pacra.com