VIS upgrades entity ratings of Faysal Bank Ltd

July 01, 2025 (MLN): VIS Credit Rating Company Limited (VIS) has upgraded entity ratings of Faysal Bank Limited (PSX: FABL) to 'AA+/A1+' (Double A Plus/A One Plus) from ‘AA/A1+’ (Double A/A One Plus).

Medium to 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 'A1+' indicates strongest likelihood of timely repayment of short-term obligations with outstanding liquidity factors.

Outlook on the assigned ratings is ‘Stable.’

Previous rating action was announced on June 28, 2024.

The assigned ratings to FABL reflect a sound financial profile, underpinned by FABL’s strong trajectory in Islamic banking after successful transformation into a full-fledged Islamic bank.

Moreover, digital transformation, asset quality, and prudent financial management have supported the upgrade.

The Bank, along with its subsidiaries, is recognized as a leader in Shari’ah compliance.

It holds a Shari’ah Compliance and Fiduciary Rating of ‘SCFR(pk) 1’ on the national scale from the Islamic International Rating Agency (IIRA), indicating no material deviations from the national regulatory framework for Shari’ah-compliant finance.

On the global scale, the Bank has been assigned a rating of ‘SCFR (Global) High’, reflecting a high level of adherence to international standards in fulfilling fiduciary obligations under Shari’ah-compliant finance.

Conscious of Shari’ah risk, the Bank’s corporate governance and internal control frameworks support prudent operations; CSR engagement and transparent disclosures further strengthen stakeholder confidence.

FABL continues to expand its branch network, reaching 855 branches in 2024 with plans to increase to 1,000 by 2026, while simultaneously advancing its digital banking capabilities, reinforcing its position in both Islamic and digital banking.

This dual strategy supports low-cost deposit mobilization, with current account share improving to 41.2% in 1QCY25, aiding funding stability and cost efficiency.

Gross financing grew by 12.4% to Rs675.0 bn by Dec’24, driven by prudent underwriting and strong recoveries.

Asset quality remains sound, with only a nominal rise in NPLs and improved provisioning coverage.

Growth has been supported by a 70.9% YoY increase in remittances, capturing 7-8% of market share, with future lending focused on low-risk, export-oriented sectors, mainly in the corporate segment.

The Bank maintains strong funding and liquidity metrics, supported by a rising share of low-cost deposits and improved granularity.

While recent monetary easing has slightly compressed margins, steady growth in funded income-net and non-funded income continues to drive profitability.

Though branch expansion may temporarily raise costs, long-term profitability is supported by deposit-led growth.

Capitalization remains adequate, with CAR well above regulatory thresholds.

Moreover, the Bank’s Tier-1-dominated capital structure offers flexibility to raise additional capital if required, while its measured growth strategy ensures that risk-weighted assets remain manageable.

The Bank’s emphasis on digital transformation, coupled with investments in inclusive banking and sustainability, positions it to benefit from emerging sectoral trends while maintaining compliance with regulatory and Shari’ah governance frameworks.

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