Press Release

JCR-VIS Reaffirms the Entity Ratings of Arif Habib Bank Limited at ‘A/A-2’ (Single A / A-Two)

Karachi, June 30, 2009: JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the entity ratings of Arif Habib Bank Limited (AHBL) at ‘A/A-2’ (Single A / A-Two). The ratings remain on ‘Rating Watch-Developing’ pending finalization of proceedings regarding acquisition of substantial stake in the bank by a major consortium.

The current sponsors of the bank have entered into an agreement with the consortium for transfer of management control and ownership up to 60%. Subsequently, further equity injection in the bank is planned to raise its paid-up capital beyond the minimum regulatory requirement for 2009. In line with the acquisition proceedings, there has been a change at the helm of the institution and a new CEO having considerable experience in commercial banking, along with other senior management personnel, has been appointed. Being a small sized commercial bank AHBL is faced with difficulty in attracting low cost core deposits, while a sound loan book will also take time to develop. The bank is considering various recapitalization and growth alternatives to overcome these limitations.

In line with overall economic and banking sector trends, portfolio quality indicators suffered; particularly in cases where financing had been extended to capital market participants. The bank faced heightened pressure on liquidity during the last quarter of 2008. Due to focused efforts, AHBL has been able to improve liquidity position by end of 1Q09 though concentration in deposits and advances still persists. JCR-VIS will be keenly monitoring developments pertaining to change in ownership and its impact on the bank’s financial standing and impact of steps taken to improve stress on liquidity. Injection of fresh capital by the new sponsors will be critical for maintaining ratings at current level.

For further information on this rating announcement, please contact Mr. Safdar Kazi (Ext: 501) or Ms. Sabeen Saleem (Ext: 510) at (+92-21) 5311861-70 or fax to (+92-21) 5311872-3.




Faheem Ahmad
President & 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 2009 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .