Press Release

JCR-VIS Reaffirms Entity Ratings of Habib Bank Limited

Karachi, June 28, 2013: JCR-VIS Credit Rating Company Limited has reaffirmed the entity ratings of Habib Bank Limited (HBL) at ‘AAA/A-1+’ (Triple A/A-One Plus). Outlook on the ratings is ‘Stable’.

The assigned ratings take into account the systemic importance of HBL in the domestic financial sector. With growth in domestic deposit base of HBL surpassing that of the industry, the bank has been able to achieve the largest share in domestic deposits at end FY12. Even though concentration in depositor profile has increased on a timeline basis on account of acquisition of large ticket deposits, sizeable liquid reserves mitigate the concentration risk and the bank continues to enjoy strong liquidity profile.

Ratings also take into account sustained internal capital generation, which has allowed HBL to maintain strong capitalization levels to absorb downside risks emanating from financing and investment activities. Net NPLs in relation to equity base have remained within manageable limits.

In line with the trend observed at other large banks, HBL’s exposure to public sector advances witnessed an increase in 2012. Across the banking sector, there have been delays in debt servicing by some public sector entities. While debt restructuring schemes have been introduced in the past, delays in servicing of public sector loans expose the banking sector to economic losses. While corporate lending remains the mainstay of the bank’s financing activities, HBL is looking to grow its consumer portfolio where loss indicators have so far been largely contained. Overseas loan book comprises about one-fifth of the total loan book; the bank is selectively looking to enhance its overseas operations, particularly in the UAE market. Diversification benefits arising from overseas operations depend on the market correlations in which the bank operates.

Profit posted for FY12 was higher than the preceding year. While spreads are expected to squeeze further given the decline in policy rate, balance sheet growth is expected to allow HBL to maintain strong profitability. Moreover, with growth in deposits for 2013 envisaged to be slower compared to prior years, deposit mobilization activities will be focused on achieving greater cost-efficiency. Given the size of the bank’s operations, there is room to enhance fee based income. Management’s initiatives in the areas of cash management services & branchless banking operations may facilitate in enhancing the same.

For further information on this rating announcement, please contact Mr. Javed Callea (Ext: 501) or Ms. Sobia Maqbool, CFA (Ext: 604) at 35311861-70 (10 lines) or fax to 35311873.



Jamal Abbas Zaidi
Deputy CEO

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 2013 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .