Press Release

JCR-VIS Reaffirms Entity Ratings of Habib Bank Limited

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Karachi, June 30, 2014: JCR-VIS Credit Rating Company Limited has reaffirmed the entity ratings of Habib Bank Limited (HBL) at ‘AAA/A-1+’ (Triple A/A-One Plus). Outlook on the assigned ratings is ‘Stable’.

Ratings draw strength from HBL’s strong franchise and its systemic importance to the national economy as the largest commercial bank, with a market share of 15.7% in domestic deposits. The bank’s extensive outreach and strong retail base remain its key strengths. Moreover, the bank’s robust capitalization reassures the protection available to depositors. The declining level of net non-performing assets bodes well for the bank’s risk profile.

In 2013, the bank maintained its market share in deposits while at the same time achieving meaningful improvement in the deposit mix, manifested in increased proportion of current and savings accounts, which is now largely in line with peers. While retaining focus on the quality of deposits, the bank plans to pursue aggressive deposit growth target in the on-going year.

In line with sector trends, pace of lending in case of domestic operations has not been at par with growth in deposits in recent years. Given that return on savings deposits has been pegged to market benchmark rate and yields on government paper have come down, banks may be inclined to pursue growth in lending activities. As the largest bank in the country having the necessary resources and a well developed risk infrastructure, HBL is well positioned to take advantage of growth opportunities in the market. Corporate banking remains the mainstay of the bank’s lending activities; however the bank intends to meaningfully enhance the proportion of consumer financing that may yield better margins. Overseas loan portfolio depicted notable increase in 2013, where impetus was mainly provided by UAE operations. Overseas operations provide diversity to the bank’s risk profile; benefits arising from the same would continue to depend on correlations in the markets in which the bank operates. Continued monitoring of country wise risk level is required to manage the overall balance sheet risk.

Almost half of the bank’s balance sheet is deployed in investments, including the bank’s strategic holding in various financial sector entities, local and abroad. Credit and market risk arising from the investment portfolio is considered manageable in context of the bank’s loss absorption capacity. Strategic investments have largely posted profitable operations in 2013.

Despite spread compression, profitability of HBL remained strong in 2013. The impact of pressure on spreads is proposed to be mitigated by continued balance sheet growth. Various other initiatives such as cost controls, growth in high yielding assets and enhanced focus on fee based income are also being pursued to grow the bottom line.

For further information on this rating announcement, please contact Mr. Javed Callea (Ext: 501) or Ms. Sobia Maqbool, CFA (Ext: 604) at 35311861-70 or fax to 35311872-3.

Abdur Rahim, ACII

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 2014 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