VIS Credit Rating Company Limited www.vis.com.

pk

RATING REPORT

Habib Bank Limited

REPORT DATE: RATING DETAILS

June 29, 2022 Latest Rating Previous Rating
Rating Category Long- Short Long- Short
RATING ANALYSTS: term -term term -term
Arsal Ayub, CFA Entity Rating AAA A-1+ AAA A-1+
arsal.ayub@vis.com.pk
TFC (ADT-1) AA+ AA+
Outlook Stable Stable
Date June 29, 2022 June 30, 2021

COMPANY INFORMATION
External auditors:
Established in 1941 KPMG Taseer Hadi & Co.
Public Limited Company Chairman of the Board: Mr. Sultan Ali Allana
Key Shareholders (with stake more than 5%): President & CEO: Mr. Muhammad Aurangzeb
Aga Khan Fund for Economic Development – 51.00%

APPLICABLE METHODOLOGY
VIS Commercial Banks Rating - June 2020
https://s3-us-west-2.amazonaws.com/backupsqlvis/docs/Meth-CommercialBanks202006.pdf

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Habib Bank Limited

OVERVIEW OF
THE RATING RATIONALE
INSTITUTION

Habib Bank Limited The assigned rating incorporates HBL’s market positioning in Pakistan’s banking sector,
(HBL) was established its systemic importance and diversified operations.
as a privately held bank
in 1941. Currently the Habib Bank Limited (HBL) is the largest commercial bank in the country with market share (based
Bank operates as a
public limited company
on domestic deposits) remaining consistently over 14%. HBL enjoys strong franchise with
with majority systemic importance to Pakistan’s financial sector. The Bank through its subsidiaries and
shareholding held by associates has a presence in the Insurance (Jubilee Life and Jubilee General are amongst the
the Aga Khan Fund for leading insurance companies in the country), Asset Management (HBL AMC) and Microfinance
Economic (HBL Microfinance Bank, formerly First Microfinance Bank Limited, the second largest
Development
(AKFED). microfinance bank in the country) sectors as well.

Profile of Chairman The rating incorporates asset quality indicators of HBL, which compare favorably to
‘Large Banks’ median
Mr. Sultan Ali Allana
has served as the On a YoY basis, HBL’s NPL’s remained relatively unchanged, albeit 7% uptick in NPLs was
Chairman of the Board
of Directors of HBL noted in Q1’22. The asset quality indicators of the Bank compare favorably to the ‘Large
since February 2004. Banks’ median. Furthermore, the Bank’s net infection at 0.6% is considered to be adequately
He has over 36 years of low and provisioning coverage is considered adequate.
experience in the
financial and banking
sector. Mr. Allana also The rating incorporates strong liquidity profile of HBL
serves on the Boards of
several institutions. HBL’s liquidity profile derives strength from its sizable branch network and growing
branchless banking touchpoints, which translate into a strong ability to raise deposits and
Profile of CEO maintain market positioning. HBL’s deposit generation ability is also evident from its cost of
Mr. Muhammad funding, which was in line with the ‘Large Banks’ median as of 2021. As is the case across
Aurangzeb joined HBL the industry, HBL’s liquidity profile also incorporates sizable liquid reserves in relation to
on April 30, 2018 as the deposits and borrowings.
President & CEO of
the Bank. Mr.
Aurangzeb possesses an HBL’s domestic profitability depicted healthy growth, albeit overall profitability
overall banking indicators remain stressed, leaving room for further improvement
experience of more
than 30 years in both In line with the industry trend, wherein average benchmark rate prevailing during 2021 was
domestic and lower than 2020, HBL’s NIM depicted contraction. HBL’s domestic profitability depicted
international locations.
He has held senior
healthy growth, albeit overall profitability indicators remained stressed on account of HBL’s
positions in ABN international operations, leaving room for further improvement. Accordingly, HBL’s RoAA
AMRO Bank and Royal remained on the lower side, trailing the industry and the ‘Large Banks’ median.
Bank of Scotland and
was Chief Executive
Officer – Global The short to medium term outlook on HBL’s profitability is stressed mainly as NIM is likely
Corporate Bank, Asia to undergo contraction in the short term and normalize by Q4’22/Q1’23. This is mainly
following the upward trajectory in benchmark rates, which should translate into an uptick in
NIM. Nevertheless, given the lag in repricing of assets vis-à-vis liabilities, the NIM is likely to

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Pacific at JP Morgan contract in Q2/Q3’22 and normalize subsequently. It is pertinent to mention that the growth
prior to joining HBL. in non-fund-based income would partially offset this impact. Furthermore, the sizable
holdings of PIB portfolio will translate into MTM deficits on investments, which will impact
HBL’s capital buffers, as this deficit forms part of the Tier II capital.

Macroeconomic changes and deficit on investment portfolio has translated into stress on
the Bank’s capital adequacy

Given the continued growth in advances and a sizable depreciation in USD/PKR parity,
HBL’s capital adequacy has trended down since our last review. As of Dec’21, HBL’s CAR
stood marginally lower than the ‘Large Banks’ median, albeit remained compliant with
benchmarks for the assigned rating. In Q1’2022, as the Bank recorded a deficit of Rs. 10b
(net of deferred tax) on its fixed income portfolio, HBL’s unconsolidated CAR eligible equity
was affected. As of end-Mar’22, HBL’s CAR and Tier I CAR receded further falling below
the ‘Large Banks’ median. The management is undertaking a number of initiatives to
conserve risk weighted assets, and maintaining the CAR at similar level YoY.

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FINANCIAL SUMMARY (amounts in PKR millions) Appendix I

BALANCE SHEET Dec’19 Dec’20 Dec’21 Mar’22
Investments 1,351,962 1,912,238 1,905,189 2,125,505
Net Advances 1,073,019 1,117,321 1,384,549 1,439,099
Total Assets 3,053,734 3,643,712 4,074,588 4,271,888
Borrowings 382,072 540,095 432,262 790,785
Deposits & other accounts 2,301,899 2,669,491 3,184,261 2,979,194
Subordinated Loans 22,360 22,356 12,374 12,374
Tier-1 Equity 155,251 183,378 203,800 207,652
Paid Up Capital 14,669 14,669 14,669 14,669
Net Worth 201,422 242,725 257,929 254,118

INCOME STATEMENT 2019 2020 2021 Q1’21 Q1’22

Net Spread Earned 94,626 122,052 120,947 30,062 33,161
Net Provisioning / (Reversal) 2,530 10,224 6,353 1,727 787
Non-Markup Income 18,759 25,743 30,724 7,375 9,205
Administrative expenses 82,709 83,152 84,608 21,350 27,078
Profit/ (Loss) Before Tax 27,099 52,994 58,974 14,000 14,060
Profit / (Loss) After Tax 15,064 31,524 34,271 8,298 8,295

RATIO ANALYSIS Dec’19 Dec’20 Dec’21 Mar’22

Market Share (Domestic Advances) 11.6% 12.2% 12.1% N/A
Market Share (Domestic Deposits) 14.6% 14.1% 14.1% N/A
Gross Infection 6.3% 6.3% 5.1% 5.2%
Provisioning Coverage 96% 101% 106% 102%
Net Infection 0.6% 0.7% 0.4% 0.6%
Cost of deposits 5.44% 4.49% 3.58% 4.84%
Gross Advances to Deposits Ratio 46.9% 40.0% 41.2% 45.6%
Net NPLs to Tier-1 Capital 3.8% 4.3% 2.4% 4.0%
Capital Adequacy Ratio (CAR) 17.07% 19.20% 17.22% 16.35%
NIM 3.53% 4.90% 4.23% 4.93%
Efficiency 72.4% 59.5% 56.7% 64.1%
ROAA 0.5% 0.9% 0.9% 0.8%*
ROAE 8.8% 16.4% 15.6% 14.1%*
Liquid Assets to Deposits & Borrowings 59.7% 65.0% 62.1% 59.0%
* Annualized

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ISSUE/ISSUER RATING SCALE & DEFINITIONS Appendix II

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REGULATORY DISCLOSURES Appendix III

Name of Rated Habib Bank Limited
Entity
Sector Commercial Banks
Type of Relationship Solicited
Purpose of Rating Entity & TFC Rating
Rating History Medium to Rating Rating
Rating Date Short Term
Long Term Outlook Action
RATING TYPE: ENTITY
29-Jun-22 AAA A-1+ Stable Reaffirmed
30-Jun-21 AAA A-1+ Stable Reaffirmed
30-Jun-20 AAA A-1+ Stable Reaffirmed
28-Jun-19 AAA A-1+ Stable Reaffirmed
31-Dec-18 AAA A-1+ Stable Maintained
29-June-18 AAA A-1+ Negative Reaffirmed
22-Sep-17 AAA A-1+ Negative Maintained
30-June-17 AAA A-1+ Stable Reaffirmed
30-June-16 AAA A-1+ Stable Reaffirmed
30-June-15 AAA A-1+ Stable Reaffirmed
30-June-14 AAA A-1+ Stable Reaffirmed
28-June-13 AAA A-1+ Stable Reaffirmed
26-June-12 AAA A-1+ Stable Upgrade
29-June-12 AA+ A-1+ Stable Reaffirmed
13-June-11 AA+ A-1+ Stable Reaffirmed
29-June-10 AA+ A-1+ Stable Reaffirmed

Rating Rating
Rating Date Medium to Long Term
Outlook Action
RATING TYPE: TFC-2 (ADT-1)
29-Jun-22 AA+ Stable Reaffirmed
30-Jun-21 AA+ Stable Reaffirmed
30-Jun-20 AA+ Stable Reaffirmed
28-Jun-19 AA+ Stable Final
31-Dec-18 AA+ Stable Preliminary
Instrument In Dec’20, the Bank exercised its call option on the outstanding Term Finance Certificate
Structure (TFCs eligible for recognition as Tier II Capital) which stood fully redeemed on Feb 19, 2021.
(Tier 2)
Privately placed, perpetual, unsecured, subordinated, non-cumulative and contingent
Instrument convertible Additional Tier-I (ADT-1) TFC amounting Rs. 12.4b.
Structure
(Tier 1)
Statement by the VIS, the analysts involved in the rating process and members of its rating committee do not
Rating Team have any conflict of interest relating to the credit rating(s) mentioned herein. This rating is an
opinion on credit quality only and is not a recommendation to buy or sell any securities.
Probability of VIS’ ratings opinions express ordinal ranking of risk, from strongest to weakest, within a
Default universe of credit risk. Ratings are not intended as guarantees of credit quality or as exact
measures of the probability that a particular issuer or particular debt issue will default.
Disclaimer Information herein was obtained from sources believed to be accurate and reliable; however,
VIS does not guarantee the accuracy, adequacy or completeness of any information and is

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not responsible for any errors or omissions or for the results obtained from the use of such
information. For conducting this assignment, analyst did not deem necessary to contact
external auditors or creditors given the unqualified nature of audited accounts and diversified
creditor profile. Copyright 2022 VIS Credit Rating Company Limited. All rights reserved.
Contents may be used by news media with credit to VIS.
Due Diligence Name Designation Date
Meetings 1 Mr. Aamir Irshad Head Corporate, Commercial &
Conducted 17-May-
Investment Banking
2022
2 Mr. Irfan Ahmed Meer Financial Controller

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