Press Release

Ratings of Habib Bank Limited

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Karachi, June 30, 2016: 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). JCR-VIS has also reaffirmed TFC rating of HBL at ‘AAA’ (Triple A). Outlook on the assigned ratings is ‘Stable’. Previous rating action for entity and TFC was announced on June 30, 2015 and December 17, 2015, respectively.

The assigned ratings reflect systemic importance of HBL in the domestic financial sector; being the largest commercial bank operating in Pakistan. Growth in domestic operations during 2015 also included acquisition of Barclays Pakistan business. Moreover, the bank acquired controlling stake in First Microfinance Bank Limited (FMFB) in May 2016. HBL also has sizeable presence outside Pakistan with 14% of the total assets of the bank deployed overseas.

Assigned ratings incorporate the sound liquidity profile of the bank illustrated by a cost effective and granular deposit base coupled with the presence of significant liquid assets on the balance sheet; the same depicted improvement on a timeline basis. Management’s strategy to reduce high cost term deposits has slightly reduced the market share of HBL. Capital adequacy ratio (CAR) of the bank at 15.9% remains healthy and maintenance of the same would commensurate with the assigned ratings, going forward.

The bank was successful in increasing its core earnings and profit after tax, despite the compression in banking spreads driven by the declining policy rates, on the back of volumetric growth in markup bearing assets, lower cost of deposits, higher fee and commission income and sizeable realized capital gains on sale of securities, especially PIBs. Going forward, management plans to pursue growth in low cost deposits and increase financing in high yielding segments in order to mitigate the impact of reduction in income generated from capital gains.

During 2015, HBL issued a subordinated Tier 2 TFC amounting to Rs. 10b spanning a tenor of 10 years. A call option and lock-in-clause is embedded in the instrument. Structure of the instrument and the bank’s sound capitalization reassures the protection available to depositors.

For further information on this rating announcement, please contact the undersigned at (Ext: 501) or Mr. Mohammed Khalid Ali (Ext: 508) at 021-35311861-71 or fax to 021-35311872-3.

Javed Callea

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 2016 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