Press Release
VIS Upgrades Ratings of Basel 3 Compliant Tier-2 (Sukuk 2) Instrument of Al Baraka Bank (Pakistan) Limited
Karachi, June 27, 2025: VIS Credit Rating Company Limited (VIS) has upgraded the rating assigned to Sukuk 2 of Al Baraka Bank (Pakistan) Limited (‘ABPL’ or the ‘Bank’) to ‘A+’ (Single A Plus) from ‘A’ (Single A). The long-term instrument rating of ‘A+’ denotes good credit quality; protection factors are adequate. Risk factors may vary with possible changes in the economy. The entity ratings of ABPL have also been upgraded to 'AA-/A1' (Double A Minus/A One) from ‘A+/A1’ (Single A Plus/A One). The outlook on the assigned rating is ‘Stable.’ The previous rating action was announced on June 30, 2024.
The instrument is a fully paid-up, rated, unsecured, subordinated, privately placed sukuk based on Mudaraba, qualifying as Tier-II capital under State Bank of Pakistan’s (SBP) Basel III framework. The sukuk, amounting to PKR 1.735 billion, was issued on December 22, 2021, with a tenor of 10 years and a maturity date of December 21, 2031. The sukuk carries a profit rate of 6-month KIBOR plus 1.5% per annum, with profit payments to be made semi-annually in arrears. Profit is computed under the general depositors’ pool based on the Profit-Sharing Ratio (PSR) and monthly weightages as announced by the Bank. Redemption is structured as a bullet payment at the end of the tenor.
The Sukuk includes a call option, exercisable at the Bank’s discretion any time after five years from the date of issue, subject to prior approval of the SBP. A lock-in clause is applicable, whereby profit and/or redemption payments may be withheld if such payment results in a shortfall in the Bank’s Minimum Capital Requirement (MCR) or Capital Adequacy Ratio (CAR). Further, the Sukuk carries a loss absorbency clause, wherein the instrument, at the discretion of SBP, may be permanently converted into common shares upon the occurrence of a Point of Non-Viability (PONV) trigger event or for any other reason as directed by SBP.
For further information on this ratings announcement, please contact at 021-35311861-64 or email at info@vis.com.pk.
Applicable Rating Criteria:
Financial Institution
https://docs.vis.com.pk/Methodologies%202024/Financial-Institution-v2.pdf
Instrument Rating
https://backupsqlvis.s3.us-west-2.amazonaws.com/Methodologies-2025/IRM-Apr-25.pdf
VIS Issue/Issuer Rating Scale
https://docs.vis.com.pk/docs/VISRatingScales.pdf