Karachi, October 05, 2011: JCR-VIS Credit Rating Co. Ltd. (JCR-VIS) has reaffirmed the rating assigned to the TFC-1 issue of Rs. 2.5b of Allied Bank Limited (ABL) at AA- (Double A Minus). Outlook on the assigned rating is Stable.
Cognizant of rising delinquencies in the private sector and returns available on low risk government securities, the banking sector largely remains risk averse, as also evident in the commercial banks incremental exposure against government paper. In line with industry trends, investments now represent a higher proportion of ABLs asset mix.
To arrest the impact of heightened credit risk prevailing in the environment on the banks loan book, growth in 2010 was achieved through deepening relationships with top-tier borrowers. Asset quality indicators of the bank compare favorably to peer banks. However, loan book of the bank features concentration.
Through its geographic footprint, entailing 809 branches across Pakistan at June-end 2011, ABL has been able to maintain its position as the fifth largest commercial bank in the country, having a market share of 7.3% in domestic deposits at end-June11. Leveraging on its strong franchise, the bank has been able to cultivate a large proportion of Current and Savings deposits in its deposit mix, thereby maintaining its cost of deposits on the lower side. International diversification may allow the bank to establish franchise in global markets.
Given the healthy spreads of the bank, profitability indicators have remained strong. Liquidity profile of the bank is considered sound given the granularity in the deposit base and liquid reserves on books. Tier-I capital adequacy has continued to gain strength over the years on account of profit retention while depositors protection is further enhanced by the issue of tier-II subordinated debt.