LAHORE, Oct 12: Pakistan Credit Rating Agency (Pacra) has placed the ratings of Al-Faysal Investment Bank Ltd (AFIBL) on rating watch owing to its expected merger with Faysal Bank Ltd (FBL).

A Pacra announcement on Friday said AFIBL was assigned a long-term rating of ‘AA+’ (double A plus) and a short-term rating of ‘A1+’ (A one plus) recognizing its ability to maintain a very low risk profile of assets, stable earnings from its core activities as well as from reverse repo transactions and demonstrated ability of the management to identify and benefit from emerging opportunities in the market. The support of the controlling shareholder — Dar Al-Maal Al Islami, an international banking and financial services group — was also duly factored in these ratings.

After completion of the merger process, the asset size of the combined entity would be considerably larger than the current asset size of AFIBL. However, FBL’s long-term rating of ‘A+”, assigned by another rating agency, is considerably lower than that of Pacra’s corresponding rating AFIBL. This will obviously affect the rating of the merged entity, said the announcement.

The announcement said Pacra’s ratings for AFIBL will automatically stand withdrawn on its cessation as a legal entity after its merger with FBL.

CresBank: Crescent Investment Bank (CresBank) Ltd is expecting to make “adequate financing arrangements to meet its obligations”.

This was indicated by the CresBank management through information provided by the bank to Pakistan Credit Rating Agency (Pacra) recently.

However, the bank management has also attached a “proviso” to the “success” of its efforts to arrange finances, saying, “the success of such arrangements depend on the stock market behaviour which continues to be volatile.” Pacra on Friday announced that it had downgraded both the long-term and short-term entity ratings to ‘BB+’ (Double B Plus) and ‘B’ (Single B) respectively, after receiving the latest information from the bank.

Pacra said the ratings were downgraded in consideration of impairment in risk absorption capacity of the bank emanating from erosion in equity and elevated gearing, uncertainties surrounding the resolution of liquidity problems, and pending the finalization of a definite strategy of capital restructuring.

The announcement said the ratings would continue to be on ‘Rating Watch’ of the agency. It said the downgrading CresBank’s ratings reflected Pacra’s concern about the lack of timely support from the bank’s sponsors.

Pacra had put the CresBank’s long-term and short-term ratings on its Rating Watch on October 2, pending formulation and outcome of its management’s strategy to arrange requisite liquidity to meet its obligations. The agency will review the ratings as soon as the outcome of the management’s efforts and plans become known.

CresBank, having a hefty exposure in the equities markets, plunged into deep liquidity crisis when the country’s stock markets declined and were closed down for one whole week last month to avoid further losses in share values in the wake of the terrorists attacks on New York and Washington.