Press Release

VIS reaffirms rating of Basel 3 compliant ADT-1 (TFC-2) instrument by HBL

Karachi, June 27, 2023: VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Habib Bank Limited (‘HBL’ or ‘the Bank’) at ‘AAA/A-1+’ (Triple A/A-One Plus). Rating of HBL’s Basel III compliant additional Tier-1 (ADT-1) TFC (issued in September 2019) have also been reaffirmed at ‘AA+’ (Double A Plus). Outlook on all the assigned ratings is ‘Stable’. Previous rating action was announced on June 29, 2022.

The assigned ratings incorporate HBL’s position as the largest commercial bank in the country and its systemic importance to Pakistan’s financial sector, given its classification as a Domestic - Systemically Important Bank (D-SIB) by SBP.

HBL advances growth rate remained higher than the industry, increasing its advances market share and Gross Advances to Deposit Ratio (ADR) 1. HBL maintains favorable asset quality indicators with a low net infection rate and sufficient provisioning coverage as of Mar’23.

HBL's investment portfolio increased in Mar’23, primarily driven by increase in investment in Pakistan Investment Bonds (PIBs). The portfolio consists mainly of low credit risk sovereign securities; however, these do expose the Bank to Interest rate risk. With respect to market risk, HBL focuses on investing in Treasury Bills (T-Bills) with shorter durations and these decisions are continuously under review as per changes in the policy rate and expected market conditions.

Liquid assets relative to deposits and borrowings after some decrease at end Dec’22, recouped in Mar’23. HBL continues to maintain significant liquid reserves, providing ample cover to its liabilities. HBL experienced a controlled deposit growth to maintain cost efficiency and focus on increase in current and low-cost deposits. Nonetheless, the overall deposit composition is reflective of well-established network and access to low cost sources.

HBL's profitability shows growth, driven by increased net markup income and non-markup income. However, the Bank faces vulnerability due to significant holdings of PIBs (where the duration is being reduced) and an economic environment of elevated credit risk in term of advances. The financial risk profile of the Bank is expected to remain within the assigned ratings in the rating horizon.

HBL's Capital Adequacy Ratio (CAR) has faced a decline due to the impact of FX devaluation on overseas risk weighted assets and investments, along with, Mark-to-Market losses on PIBs and GoP Bonds. As of Mar’23, HBL's CAR was lower than the median of large banks, but recovery is expected partially within the rating horizon. The management is taking initiatives to reduce risk-weighted assets and improve the CAR. Maintaining CAR and asset quality commensurate with the assigned ratings would continue to be important, going forward.

For further information on this rating announcement, please contact Mr. Musaddeq Ahmed Khan (Ext: 216) at 92-21-35311861-64 or email at

Javed Callea

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

1 Adjusted for SBP refinancing schemes

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