Press Release

VIS Reaffirms Entity Ratings of Faysal Bank Limited

Karachi, June 27, 2023: VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Faysal Bank Limited (FBL) at ‘AA/A-1+’ (Double A/A-One Plus). Long term rating of ‘AA’ indicates high credit quality; protection factors are strong. Risk is modest but may vary slightly from time to time because of economic conditions. Short term rating of ‘A-1+’ indicates highest certainty of timely payments; short term liquidity, including internal operating factors and/or access to alternative source of funds, is outstanding and safety is just below risk free Government of Pakistan’s short term obligations. Outlook on the assigned ratings is ‘Stable’. Previous rating action was announced on June 30, 2022.
The assigned rating incorporates FABL’s market positioning as a medium-sized bank, given its market share of 3.4% as of Mar’23. As of January 1, 2023, the Bank has successfully converted into an Islamic bank. Given the scale, the conversion is significant and puts the Bank in a new league of Islamic banks. With the rapid growth of Islamic banking in recent years, the market offers greater opportunities for the Bank.

The rating also incorporates improvement in gross infection (GI) noted across the segments. Moreover, as of Mar’23, the net infection rate of 0.6% compares favorably with peers and industry. However, specific provisioning coverage of 85.6% is considered adequate, compared to peers with room for improvement when benchmarked against the industry.

Liquidity metrics of the Bank are slightly affected by deposit concentration. While there has been improvement in deposit composition, with an increase in Current Account Saving Account (CASA), deposit growth from relatively larger-sized depositors has impacted deposit granularity. This, along with greater reliance on relatively more volatile deposits, has led to a slight decline in Liquidity Coverage Ratio (LCR) over time which remains comfortably above the regulatory threshold.

FABL's profitability indicators, such as return on assets (RoAA), are comparable to peers. Margin improvement is expected to continue, allowing the Bank to absorb potential provisioning burden amid a heightened credit risk environment. Maintenance and further enhancement of low cost deposit base will remain important for future profitability given challenges for pricing improvement in financings market.

Capital adequacy of FABL, with some attrition on timeline, is expected to remain sound relative to peers. As the Bank aims to grow its balance sheet and financing book, the increase in risk-weighted assets may impact capital adequacy. The higher provisioning burden and credit headwinds could limit internal capital generation. However, the impact on Capital Adequacy Ratio (CAR) is not expected to be significant, with the Bank expected to maintain CAR above the industry average.

For further information on this rating announcement, please contact the undersigned (Ext: 201) or Mr. Musaddeq Ahmed Khan (Ext: 216) at 021-35311861-64 or email at

Javed Callea

Applicable rating criterion: VIS Financial Institution Methodology – June 2023
VIS Rating Scale:

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