Associated Bank Limited (ABL) (Urdu ：الائیڈ بینک لمیٹڈ） is a Pakistani commercial bank headquartered in Lahore, Punjab, Pakistan. It is a subsidiary of Ibrahim Group.

It was established in 1942 under the name Australasia Bank. It was renamed Allied Bank of Pakistan in 1974 from Australasia Bank Limited and Sarhad Bank Ltd, Lahore Commercial Bank Ltd and Pak Bank Ltd were also merged.

History

1942-1974: The first few years

Union Bank was established on December 3, 1942, formerly known as Australasian Bank in Lahore with an initial capital of Rs 120,000. It was founded by Khawaja Bashir Bux, the son of a silk merchant. Khawaja Bashir Bux's father was originally from Kashmir and settled in Lahore after being orphaned at a young age. He trained in silk weaving and later moved to Mumbai in the 1880s to work with silk merchants. After gaining experience and traveling extensively, he established his own successful silk business in Perth, Australia. Born in 1911, Bashir Bux initially joined his father's silk trade, but later decided to dabble in the banking industry. After the partition of India, the bank experienced significant growth and success as many major Indian banks left Pakistan.

1974-1991: Nationalization, Merger and Bailout

In 1974, under the nationalization policy of Prime Minister Zulfikar Ali Bu, Bank of Australasia merged with Sarhad Bank, Lahore Commercial Bank and Bank of Pakistan to become one of five nationalized commercial banks in Pakistan.

Following the era of nationalization, Pakistan's banking industry faced major financial challenges. By 1988, five state-owned banks, including Allied Bank, were costing the government the equivalent of 8.8% of the country's GDP annually due to frequent bailouts.

1991-2000: Management buyouts, corruption and decline

Allied Bank was privatized and bought by its employees in 1991. During this period, several employee buyouts took place, including the acquisition of Exxon's fertilizer division in Pakistan. Many assumed that Allied Bank's employee buyouts would lead to the creation of a successful employee-owned bank. However, this optimism proved to be misguided. Allied Bank is still operating as it did during its nationalization, and unlike ExxonMobil employees who were well versed in private sector operations, it struggles with inefficiencies and poor credit practices. While MCB Bank has shown improvement after privatization, Allied Bank continues to face financial difficulties. The bank's non-performing loans increased from 16% in 1993 to 36% in 2003. The first two CEOs appointed after privatization were jailed on corruption charges, and Allied Bank became the only Pakistani bank to go through the privatization process twice.

In 1999, a major customer of Allied Bank borrowed heavily to acquire a 35% stake in the bank. However, the customer then defaulted on the loan. State Bank of Pakistan (SBP), which holds 49% of Union Bank, intervened and prevented employees from transferring their shares to outside shareholders.

2000-Present: Cleanup, Second Privatization and Growth

Following the formation of the Musharraf government, Ishrat Hussein was appointed governor of the National Bank. He concluded that Union Bank needed a second round of privatization.

In 2000, the government appointed Khalid Sherwani, a former executive of Union Bank Limited, to lead the new management team. Sherwani implemented a cost-cutting program that included closing 194 underperforming branches and laying off 2,228 employees over four years. Although initially unpopular, these measures were supported by a booming economy, providing alternative employment opportunities.

In August 2001, Hussain replaced three board members, including the chairperson, to strengthen the bank's leadership. By February 2004, Union Bank had stabilized enough for the government and SBP to consider privatization again. However, the bank's balance sheet remained weak, with a non-performing loan ratio of 35.7% at the end of 2003.

A new privatisation strategy was developed, which involved issuing new shares rather than selling existing shares. This approach ensured that all the money injected by the buyer would go directly into the bank Six parties submitted bids for Allied Bank, with Askari Bank, NIB Bank and Ibrahim Group advancing to the final round. Textile and energy conglomerate Ibrahim Group recognised the advantages of recapitalising the bank directly. After other bidders withdrew, Ibrahim Group bought a 75% stake in Allied Bank for 14.40 billion rupees ($237 million).

Following the acquisition of Allied Bank by Ibrahim Group, Khalid Sherwani has been re-appointed as CEO Sherwani is keen to continue in his role and he aims to build on his success as a turnaround specialist. As the bank's financial strength grows, he plans to expand the branch network and diversify into other financial services, such as asset management.

Under Sherwani's leadership, the bank's costs as a percentage of revenue have continued to decline, while deposits per branch have grown faster than the industry average, closing a significant gap. Net income grew by an average of 14.8% per year to Rs 4.10 billion ($67.10 million) from 2005 to 2007. In addition, deposits grew by an average of 27.8% from 2004 to the end of 2007, reaching Rs 263 billion ($4.30 billion). Three key factors contributed to Sherwani's success: an environment of rising interest rates and lower deposit costs, the ability to attract new deposits from Faisalabad's business community due to Ibrahim Group's reputation, and the resolution of non-performing loan issues prior to privatization. During his tenure, these factors played an important role in driving Allied Bank's profitability.

While Sherwani's effective leadership is evident, it is important to note that his tenure from 2004 to 2007 coincided with a period of general financial prosperity. He succeeded in stabilizing the bank by 2004, a feat that none of his predecessors had been able to accomplish since 1974, laying a solid foundation for future growth and making the bank ready for sale.

In October 2007, Sherwani retired before the global and Pakistani financial marekt went through major upheaval. He left Union Bank with a commendable record, although this will not be his last term as the bank's leader.

In November 2007, just before the severe global financial crisis, Aftab Manzoor succeeded Khalid Sherwani as CEO of Union Bank. Despite the challenging environment, Manzoor managed to increase the bank's profitability by an average of 29.3% per annum, reaching Rs 7.70 billion ($92.60 million) by mid-2010. Manzoor's success is attributed to his prudent approach to asset expansion, keeping the non-performing loan rate below 7.4% throughout his tenure and not exceeding 8.2% even a year after he left office. The loan book registered an annualized average growth rate of 14.1%, matching the average inflation rate of 14.2% per annum.

In May 2010, Manzoor decided to leave Allied Bank in May 2010 for undisclosed reasons and Khalid Sherwani was reappointed as CEO.

In December 2014, the Government of Pakistan sold its remaining 11.5% stake in ABL for 14.40 billion Pakistani rupees. The transaction was completed at a strike price of Rs 110 per share, leaving the Government with 131.30 million shares remaining.

In September 2018, ABL opened its Shariah-compliant Aitebar Islamic banking service through its network of 117 dedicated Islamic banking branches spread across 53 major cities in Pakistan. Islamic account holders can also make account deposits and withdrawals at Islamic windows in traditional branches.

In 2020, Allied Bank was included in the FinCEN money laundering leak published by Bzzfeed News and the International Consortium of Investigative Journalists (ICIJ). It flagged 12 suspicious transactions in 2011 and 2012.

Credit Rating

As of 2023, the Pakistan rating agency (PACRA) maintains Allied Bank Ltd's long-term credit rating at AAA [Triple A] and the bank's short-term credit rating at A1 + [A One Plus].

Recognition

• 2017 Award of Excellence in Islamic Finance from the Government of Punjab, Pakistan
• Pakistan Banker of the Year 2022
• Asia Money Awards 2023 - Best Diversified and Inclusive Bank in Pakistan 2023
• Finance Asia 2023 - Best Domestic Bank