Press Release

JCR-VIS Reaffirms Entity Ratings of Habib Bank Limited at AA+/A-1+

Karachi, June 29, 2012: JCR-VIS Credit Rating Company Limited has reaffirmed the entity ratings of Habib Bank Limited (HBL) at ‘AA+/A-1+’ (Double A Plus/A-One Plus). Outlook on the ratings is ‘Stable’.

With strong domestic operations and franchise, HBL has been able to achieve sizable growth in deposits resulting in an increase in market share in domestic banking sector to 13.8% at end-1Q12. Ratings draw strength from the cost effective and granular deposit mix and strong liquidity profile. On account of healthy internal capital generation, capitalization levels have strengthened over time, increasing the protection available to depositors.

HBL has the largest domestic and overseas footprint amongst commercial banks in Pakistan. With changing population demographics steady increase in domestic branches is planned in selected areas. Overseas assets represented more than one-tenth of the bank’s resource base; profits arising from the same were subdued in 2011. Growth in overseas operations is expected to be undertaken in a cautious manner, going forward.

While demand for public sector credit has remained strong in the backdrop of circular debt crisis in the energy sector and commodity financing needs, demand for private sector credit remained weak. This along with deployment of fresh funds generated from deposits in government securities has resulted in an increase in the bank’s exposure to government & public sector entities to 40% of the asset base by year-end 2011.

Corporate loan book represents over half of the bank’s portfolio. Given the sound underwriting quality in the consumer segment the bank is poised to steadily grow in the same while efforts for further developing the SME segment are underway. Net infection in the loan book has been maintained at 2010 level, despite accretion of fresh NPLs; provisioning coverage against past credit losses is on the higher side in relation to peer banks.

HBL exhibited growth in earnings during FY11. Mark-up spreads are expected to decline further in the on-going year, given the increase in minimum deposit rate to 6%, effective May’12, resulting in almost one-fourth of the bank’s deposits being re-priced. Going forward, strategy of aggressive volumetric growth in deposits is planned to offset the impact of decrease in spreads on profitability.

For further information on this rating announcement, please contact the undersigned (Ext: 501) or Ms. Sobia Maqbool, CFA (Ext: 506) at 35311861-70 (10 lines) or fax to 35311873.


Javed Callea
Advisor

Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited (VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.VIS , the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report.VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2012 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .