Press Release

JCR-VIS Maintains AAA ratings of Habib Bank Limited; Outlook revised to ‘Negative’

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Karachi, September 22, 2017: Post settlement agreement with New York State Department of Financial Services and payment of agreed fine of $225million, JCR-VIS has maintained the entity ratings of Habib Bank Limited at ‘AAA/A-1+’ (Triple A/A-One Plus) and revised the Outlook to ‘Negative’. With the revision in outlook, rating of HBL’s outstanding Basel 3 Tier 2 TFC of Rs. 10billion (TFC-1) issued in 2016 has been revised to AA+ (Double A Plus) from AAA (Triple A). Outlook on the assigned TFC-1 rating is ‘Negative’. The previous rating action of Rating Watch - Negative was announced on August 31, 2017.

The change in outlook reflects weakening in the bank’s capitalization indicators, post penalty payment, which have fallen below JCR-VIS’s benchmark for the assigned ratings and concerns regarding risk management of the bank’s overseas operations. Given the bank’s strong domestic operations and franchise, which are expected to remain robust, JCR-VIS believes that profitability, liquidity and asset quality indicators of HBL would remain strong while capitalization indicators are expected to recover within JCR-VIS’s benchmark over the rating horizon. Moreover, improvement in overall corporate governance framework for overseas operations and smooth winding down of US operations are also considered important rating considerations. Ratings are tied to capitalization buffers being not exposed to further market or regulatory pressures and an undaunted sponsor support.

Majority owned by Aga Khan Fund for Economic Development, HBL is the largest commercial bank in the country with a market share of 14.1% in domestic deposits. Overseas assets represented 13.4% of total assets at end-2016 while contribution of International operations to HBL’s profit before tax was 2.8% during 2016.

For further information on this rating announcement, please contact Mr. Javed Callea at (Ext: 201) at 021-35311861-71 or fax to 021-35311872-3.

Faryal Ahmad Faheem
Deputy CEO

Applicable rating criterion: Commercial Banks Methodology - November 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