Karachi, VIS Credit Rating Company Limited has reaffirmed the entity ratings of Habib Bank Limited (HBL) at 'AAA/A-1+', reflecting the bank’s highest credit quality and strong liquidity, with a stable outlook for its future performance.
According to VIS Credit Rating Company Limited, the ratings highlight HBL's position as Pakistan's leading commercial bank, noted for its strong franchise and systemic importance in the financial sector. The bank's diversified deposit base, where no single depositor accounts for more than 2% of total deposits, and robust liquid reserves significantly strengthen its market access and financial stability.
The bank’s asset base expanded in 2023, with a noticeable growth in investment holdings and a moderate increase in advances, which align with broader industry trends. The corporate segment forms the bulk of HBL’s advances portfolio, where an uptick in Non-Performing Loans (NPLs) was observed due to challenging economic conditions. Despite this, HBL has managed its credit risks effectively, particularly with larger exposures largely confined to public sector entities and well-established private companies.
The adoption of IFRS-9 in 2024 has led to substantial reserves set aside for Expected Credit Losses, bolstering the bank's provisions against potential non-performances. HBL's investment strategy is notably conservative, with a predominance of sovereign issuances and a significant portion of floating rate Pakistan Investment Bonds (PIBs), mitigating market risk.
Amidst a high policy rate environment, HBL achieved wider Net Interest Margins (NIM) in 2023, although profitability gains were somewhat offset by rising non-markup expenses due to inflation. Nevertheless, the bank’s Profit before Provisions and Taxes (PBPT) saw a considerable increase, driven by higher markup and non-markup income, positioning HBL for a positive profitability outlook in 2024.
By the end of December 2023, HBL's Capital Adequacy Ratio (CAR) had improved, supported by higher retained earnings and revaluation reserves, maintaining capitalization well above regulatory requirements. The bank is set to sustain strong capital buffers, aided by expected profitability gains and cautious growth in risk assets amid prevailing market conditions.