January 2, 2019 (MLN): JCR-VIS Credit Rating Company Limited has reaffirmed the entity ratings of Habib Bank Limited (HBL) at ‘AAA/A-1+’ (Triple A/A-One Plus). In line with JCR-VIS’s standard notching criteria, rating of Basel 3 compliant Tier 2 TFC rating of HBL has been upgraded to ‘AAA’ from AA+ (Double A Plus). Outlook on all the assigned ratings has been revised to ‘Stable’ from ‘Negative’.
The assigned long term ‘AAA’ rating indicates the highest credit quality; the risk factors are negligible, being only slightly more than the risk-free Government of Pakistan’s debt. Short-term rating of ‘A-1+’ indicate highest certainty of timely payment; Short-term liquidity, including internal operating factors and/or access to alternative sources of funds, is outstanding.
The reaffirmation of the ratings and the change in outlook to stable is driven by JCR-VIS's assessment of improved financial performance metrics in terms of capitalization and asset quality indicators while robust liquidity profile has largely been maintained. Moreover, improvements being undertaken on the corporate governance framework in general and compliance front in particular have been noted positively.
Revision in outlook reflects JCR-VIS’s expectation that the bank would be able to sustain higher capital buffers as it continues to focus on capital management and improve earnings profile over the rating horizon.
Profitability indicators have depicted weakening due to international operations and sizeable non-recurring items. Ratings incorporate JCR-VIS’s expectation that profitability indicators will gradually improve in 2019 on the back of balance sheet growth & spread improvement and significant reduction in non-recurring expenses. From 2020 onwards, JCR-VIS expects profitability indicators to revert to normalized levels and become compliant with JCR-VIS’s profitability benchmark for the assigned ratings.
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