Capital base: Bank Alfalah raises debt of Rs7 billion at PSX

Funds raised through launch of Additional Tier-1 Term Finance Certificate

Salman Siddiqui March 29, 2018

KARACHI: Bank Alfalah Limited, one of the fast growing banks in Pakistan, has raised debt worth Rs7 billion at the Pakistan Stock Exchange (PSX) to increase its Capital Adequacy Ratio (CAR) in compliance with international banking regulations concerning mitigation of risk factors.

“CAR has increased by 1.5% to over 15%,” Bank Alfalah President and Chief Executive Officer Nauman Ansari said at the launch of debt instrument at PSX. The bank’s lending capacity has now been increased by Rs60 billion, he said, adding the bank would focus on SME lending and agriculture financing.

The bank raised funds through the launch of Additional Tier-1 Term Finance Certificate (TFC), which is Pakistan’s first perpetual instrument - having no pre-defined maturity lifespan like conventional debt instruments do have.

The Rs7 billion TFC would enhance the bank’s Tier-1 capital base to better meet Basle-III (international banking regulations) requirements.

Additional Tier-1 (ADT-1) was first issued in post 2008 world financial crisis. Its issuance volume is estimated at $331 billion globally, while 43% of this is in Asia. India has launched ADT-1 worth $12 billion.

The PSX has gotten the perpetual TFC listed. Shareholders may trade its units like other shares at the bourse from Thursday onwards. Besides, the bank would also pay interest money twice a year to the TFC investors at the rate of KIBOR +150 basis points.

The lead arranger of the TFC issue Arif Habib Limited Chairman Arif Habib termed it a historic day for PSX and urged its management to make banks and brokerage house financing available to traders to buy the TFC units at the bourse.

PSX Chairman Muneer Kamal said the launch of the product has activated debt capital market at the bourse.

“This is the first debt tradable instrument launched at PSX,” he said, adding this became possible with the active support and guidelines by the State Bank of Pakistan. 

Published in The Express Tribune, March 29th, 2018.

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