Lahore, June 14, 2018 (PPI-OT): The ratings reflect relative positioning of the bank among large banks of the country. The bank has a stronger position in advances – sustained by fresh deployments. The deposit system share has witnessed dilution as the bank embarked upon a strategy to sustainably rationalize its cost of funding with enduring focus on low cost deposits. Resultantly, BAFL’s cost of fund is comparable to some of the large banks. The bank enjoys extended outreach across the country which has augmented its deposit base.
Operating cost structure, though still higher than peers, has improved on YoY basis on account of cost rationalization. The asset quality of the bank has sustained over the past three years on account of prudent risk management. The bank witnessed changes in the key management positions. Effective implementation of the envisaged business strategy is important. Declining asset yield is being offset by cost efficiency hence, enabling spreads to be maintained at current levels.
Despite consistent improvement in the bank’s profitability, capital augmentation remained limited. Cognizant of the fact, the management recently issued Tier-I instrument to improve its capital, 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 ratings are dependent on the improved positioning of the bank. Improvement in spreads is essential to profitability. Strengthening of the bank’s capitalization backed by strong sponsors support and adding granularity to its advances and deposits book are essential.
For more information, contact:
Analyst
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore – Pakistan
Tel: +9242 586 9504 -6
Fax: +9242 583 0425
Email: hammad.rashid@pacra.com
Web: www.pacra.com