Press Release

JCR-VIS Maintains Instrument Ratings of Askari Bank Limited

Karachi, June 30, 2017: JCR-VIS Credit Rating Company Limited (JCR-VIS) has maintained the ratings assigned to both instruments of Askari Bank Limited (AKBL) - 4th (fourth) Issue of Term Finance Certificate (TFC-IV) & 5th (fifth) Issue of Term Finance Certificate (TFC-V) at ‘AA-’ (Double A Minus). Outlook on the assigned ratings has been revised from ‘Positive’ to ‘Stable’. The previous rating action was announced on June 29, 2016.

The ratings assigned to AKBL incorporate association with its primary shareholder, Fauji Foundation, a large conglomerate operating across diversified sectors of the country. The bank has opened 77 new branches during FY16 that increased the operating cost. The management expects that with the expansion of branches network, new business generated by them will contribute significantly towards the bank’s bottom line, which will be tracked overtime. Moreover, in order to protect profitability in a low interest rate environment, the bank intends to increase financing in high yielding assets, pursue low cost deposits while maximizing recovery of non-performing loans.

The bank has managed to expand its loan book on a timeline basis. Asset quality indicators exhibited improvement in line with decline in classified portfolio and higher loan book. Overall risk profile of the investment portfolio remained conservative with over 95% of the portfolio comprising exposure to sovereign; however, the same is exposed to interest rate risk. Exposure of the bank in listed equities stood at almost 14% of the bank’s own equity base. During FY16, the Board approved disposal of Askari Investment Management Limited and Askari Securities Limited - subsidiaries of the bank.

Overall liquidity profile of the bank remains at a comfortable level, underpinned by largely maintained liquid assets in relation to total deposits and borrowings and higher share of CASA in deposit base; however depositor concentration increased on a timeline basis.

Core earnings of the bank declined primarily on account of higher operating expenses during FY16. Despite lower cost of funds, spreads witnessed a decline on account lower benchmark rates. Non-markup income improved on back of higher fee based income and capital gains. Capitalization indicators were largely sustained at the last year’s level. Increase in tier-1 equity may be warranted to ease pressure on leverage indicators as regulatory requirements increase. Also, given management plans of building up the advances portfolio in the backdrop of declining interest rates, enhanced retention levels are required to maintain existing capitalization levels.

For further information on this rating announcement, please contact the undersigned (Ext: 201) at 021-35311861-70 (10 lines) or Mr. Maimoon Rasheed at 042-35723411-13 or fax to 021-35311873.

Faheem Ahmad
President /CEO

Applicable rating criterion:

Commercial Banks Methodology - (November 2015):
Notching the Issue - (June 2016):
Governing Linkages between Parent and Subsidiary Companies- (Jan 2015):

Information herein was obtained from sources believed to be accurate and reliable; however, JCR-VIS Credit Rating Company Limited (JCR-VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. JCR-VIS, the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report. JCR-VIS is not an NRSRO and its credit ratings are not NRSRO credit ratings. JCR-VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2017 JCR-VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to JCR-VIS.

JCR-VIS Credit Rating Company Limited