PACRA Maintains the Rating of JS Bank Limited | PPTFC | Dec-21 | Outlook Positive

The ratings reflect the improving position of JS Bank in the country's competitive banking landscape. This stems from its growing presence in the conventional banking sector and lately, via its enhanced stake in one of the rising Islamic bank. The bank is poised to reap fruits from both markets and especially in the future, as the industry is gearing towards conversion to Islamic banking. On a consolidated basis, the bank is expected to report a much higher customer deposit system share. On a standalone basis, the bank streamlined its costs, boosting core profitability through focused management efforts on its branch network and customer base. Efficacy in the funding cost plus deployment of assets at a superior rate benefited the bottom line. The latest numbers, as represented by the management, are sanguine. The Credit portfolio illustrated a decline attributable to the continuous efforts of consolidation of advances around quality lending. This reflected in the form of a reduction in NPLs. The investment portfolio is majorly vested with Government Securities. Interest income reflected a sizeable increase at PKR 64.5bln (9MCY22: PKR 48.7bln). The quantum of Foreign Exchange Income is large (9MCY23: PKR 3.7bln; 9MCY22: PKR 1.9bln). Despite higher provisioning expense, the bank’s bottom line increased manifold YoY clocking at PKR 2.3bln (9MCY22: PKR 820mln). The bank has recently penetrated into the growing Islamic Banking Industry in Pakistan through the acquisition of a significant stake in BankIslami Pakistan Limited (BIPL). The dividend income from BIPL shall augment the overall profitability.
Meanwhile, upholding asset quality, maintaining its share of advances and deposits in the banking sector, adding diversity to the income stream, building and maintaining a cushion in CAR congruent to its ratings are critical.

About the Entity
JS Bank Limited (JSBL), incorporated in March 2006, commenced its banking operations on December 30, 2006. JSBL is a subsidiary (71.21%) of Jahangir Siddiqui and Co. Limited (JSCL). Randeree Family holds 11.92% of the stake through Mr. Shabir Ahmed Randeree and Mr. Ahmed G.M. Randeree while the remaining stake is widely spread. The overall control of the bank vests in the Board of Directors (BoD) including the CEO. Post-acquisition, the shareholding of the Bank in BIPL has increased to 75.12% and BIPL has become a subsidiary of JS Bank Limited.

About the Instrument
The bank issued Tier II capital TFC amounting to PKR 2,500mln on 28-Dec-21. The tenor of the instrument is up to 7 years and carries a profit rate of 6MK +2%. The TFC would be subordinated to the payment of principal and profit, to other indebtedness of the bank, including deposits, however senior to the claims of investors in instruments eligible for inclusion in Tier 1 Capital. Neither profit nor principal will be payable in respect of TFC if such payment will result in a shortfall in the bank’s MCR or CAR. The bank may call the TFCs, with prior approval of SBP, after five years from the date of issue. The TFCs shall, if directed by the SBP, be fully and permanently converted into ordinary shares and/or have them immediately written off (partially or in full) upon the PONV Trigger Event. Major Principal Repayment (99.76%) would be paid in two equal semiannual installments of (49.88%) each, in the last year.