JCR-VJS Credit Rating Company Limited (JCR-VIS) has reaffirmed the rating assigned to the TFC-1 issue of Allied Bank Limited (ABL) at 'AA-' (Double A Minus). Outlook on the rating is 'Stable'. Banking sector lending activity picked pace after lacklustre growth in the first three quarters of FY2009.
With notable returns available on low risk securities issued by the government /public sector enterprises and rising delinquencies in private sector corporate lending, the banks have remained risk averse and the proportion of government and public debt financing has increased.
Credit risk on the lending side is still high and non-performing loans have registered consistent increase that has affected the banks' profitability on account of higher provisioning. Amidst the challenging economic environment and rising infection, ABL managed to improve its profitability, through improvement in both mark-up spreads and non-mark-up income. Infection in ABL's loan book is still favourably comparable to that of peer banks.
The proportion of CASA in the overall deposit mix has also improved; and despite an increase in unlisted/unquoted bonds in the investment portfolio, the overall liquidity position has remained satisfactory. Solvency position of the bank strengthened as the bank's CAR increased to 103.47 percent at yearend 2009 on the back of increase in both equity and Tier-II capital, through issuance of subordinated TFC-II. Appointment of the new CEO, having experience of working at the same position in ABL previously, also augurs well for continuing IT and systems improvements in the bank.-PR