Press Release

JCR-VIS assigns rating to Pakistan’s First Basel 3 compliant Tier 1 instrument by Bank Alfalah Limited

Karachi, November 08, 2017: JCR-VIS Credit Rating Company Limited (JCR-VIS) has assigned preliminary rating of ‘AA-’ (Double A Minus) to Bank Alfalah Limited’s (BAFL) proposed Basel 3 compliant Tier-1 debt instrument. Outlook on the assigned rating is ‘Stable’. Rating will be finalized upon review of signed legal documents.

BAFL is in the process of issuing a listed, perpetual, unsecured, subordinated, non-cumulative and contingent convertible debt instruments amounting up to Rs. 7.0b (inclusive of Green Shoe Option of Rs. 2.0b). The issue proceeds will contribute towards the bank’s additional Tier-1 capital and will be utilized towards enhancement of the bank’s business operations. BAFL’s tier-1 instrument will rank ahead of claims of ordinary shareholders but below the bank's senior creditors, including depositors and holders of Tier 2 TFC.

The assigned instrument rating draws comfort from the sound risk profile of BAFL. JCR-VIS has assigned entity ratings of AA+/A-1+ (Double A Plus/A-One Plus) to BAFL indicating high credit quality and adequate protection factors. The assigned ratings reflect the Bank’s diversified operations, healthy financial risk profile, strong sponsors and existing market presence. BAFL has exhibited sustained improvement across key performance areas including asset quality, liquidity, capitalization and profitability. At end-September’2017, BAFL had an asset base of Rs. 969.8billion. Tier-1 and overall CAR on a consolidated basis stood at 11.11% and 13.5%, respectively at end-September’2017.

The assigned rating portrays the relative risk of the Tier-1 instrument wherein issuer has full discretion on coupon payments, interest servicing from only profits for the year and conversion feature in the event of pre-specified trigger events, lock-in clause and point of non-viability in terms of regulatory requirements. While the regulatory framework may not consider a missed coupon payment as a default; the credit rating methodology employed by JCR-VIS would treat such missed payments as an event of default. In normal course of business, JCR-VIS believes that chances of non-performance risk are considered remote.

For further information on this rating announcement, please contact Mr. Jamal Abbas Zaidi (Ext: 207) or the undersigned (Ext: 201) at 021-35311861-70 or fax to 021-35311872-3.

Javed Callea

Applicable rating criterion: Commercial Banks Methodology – November 2015

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 2017 VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to VIS.

JCR-VIS Credit Rating Company Limited