Bank Al-Falah raises Rs7 billion through first-ever bonds

KARACHI: Bank Al-Falah, owned by Abu Dhabi Group, raised seven billion rupees through the first-ever perpetual bonds listed on the stock exchange and that were heavily over-subscribed, the bank’s senior official said on Wednesday.

“The issue has improved the bank’s cash adequacy ratio affording (it) additional capacity to lend Rs60 billion to the market,” Nauman Ansari, president at Bank Al-Falah said.

Pakistan Stock Exchange (PSX) listed the first perpetual term finance certificates (TFC) issued by Bank Al-Falah Limited to raise Tier-I capital, which is a first step towards development of a healthy debt capital market.

Ansari said the bank raised additional Tier-I capital through the country’s perpetual bonds. “This would set precedence and other banks would be encouraged to tap the debt capital market.”

Transactions in the bank’s term finance certificates will take place through bond

automated trading system and will be settled on T+1 basis.

Arif Habib Limited was the market maker to the issue.

Arif Habib, chief executive officer of Arif Habib Group said it is a historic day for the Pakistan’s bourse as “the instruments were badly needed by the market”.

“I would urge the stock exchange to approve Bank Al-Falah’s instrument as margin eligible security to encourage investors taking positions in the listed debt instruments,” Habib added.

The Central Depository Company of Pakistan Limited has already declared Bank

Al-Falah’s TFCs as eligible security. National Clearing Company of Pakistan Limited will settle all the transactions.

The instruments offer guaranteed interest of 1.5 percent in addition to Karachi interbank offered rate to be paid on biannual basis.

Chairman PSX Munir Kamal said it is the first debt instrument that was classified as Tier-I capital by the State Bank of Pakistan.

“PSX does not have derivative products and listing of a perpetual bond will provide another investment option to the investors,” Kamal added.

The additional capital of seven billion rupees would help the bank meet Basel-III requirements and enable the bank expand and grow. Non-banking financial institutions subscribed to more than 60 percent of the issue.

Managing Director PSX Richard Morin said listing of a perpetual bond was an

important milestone as the management aims to develop a resilient debt capital market.

“We hope that other issuers would understand the benefits of debt capital market, and it will help in unlocking the true development potential of the market.” Governor Sindh Mohammad Zubair also attended the ceremony.