VIS Reaffirms Entity Ratings of Faysal Bank Limited - Press Release issued by VIS Credit Rating Company Limited.

Karachi -- June 29, 2020 (PPI-OT)

Following is the text of press release issued by VIS Credit Rating Company Limited

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VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Faysal Bank Limited (FBL) at 'AA/A-1+' (Double A/A-One Plus). Long term rating of 'AA' indicates high credit quality; protection factors are strong. Risk is modest but may vary slightly from time to time because of economic conditions. Short term rating of 'A-1+' indicates highest certainty of timely payments; short term liquidity, including internal operating factors and/or access to alternative source of funds, is outstanding and safety is just below risk-free Government of Pakistan's short-term obligations. Outlook on the assigned ratings is 'Stable'. The previous rating action was announced on June 27, 2019.

FBL is a mid-sized bank engaged in provision of conventional and Islamic Corporate, Commercial and Consumer banking services. The bank was able to maintain its market share of 4.1% (2018: 4.1%) and 3.1% (2018: 3.1%) in domestic advances and domestic deposits, respectively, in 2019. The bank is in the process of transformation of the business model from a Conventional bank offering Islamic banking services to a full-fledged Islamic bank. An asset led conversion model has been adopted by the management in this regard. The ongoing pandemic and economic slowdown is likely to delay the ongoing conversion process; the management however feels that it would not significantly impact the financial profile to the bank.

The assigned ratings incorporate sound capitalization indicators, satisfactory profitability and adequate liquidity profile. Depositor concentration, however, depicts room for improvement. Overall liquidity profile of the bank is considered adequately aligned with the assigned ratings in view of sizeable liquid assets in relation to deposits and borrowings. Credit and market risk emanating from the investment is considered low as majority of the investment portfolio comprises government securities. In 2019, the increase in quantum of NPLs and lower provisions coverage compared to previous year placed the infection levels and the net NPL to Tier -1 capital ratio of the bank at a disadvantage to the rating peer group.

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