PACRA Maintains the rating of JS Bank Limited | PPTFC | 2.5bln | Dec-21.

The assigned ratings of JS Bank Limited's (“JSBL” or the “Bank”) reflect its consolidated position following the majority stake of the BankIslami Pakistan Limited. The strengthened position marked the Bank as one of the Country’s fastest-growing financial institutions. The positive fundamentals of the Islamic banking industry in general also lend support to the ratings. On a consolidated basis, JSBL has retained its market share of 4% (CY23: 4%) based on customer deposits. JSBL, a tech-driven mid-sized Bank, is stabilizing its market position by leveraging its regional presence and diverse product offerings. The Bank has increasingly gained a tech-savvy image, while continuously augmenting its futuristic layout. It has heavily invested in its digital services; "Zindigi," has become a hallmark of the Bank’s digital presence. In CY24, Zindigi's throughput rose 42% to PKR 206bln, deposits hit PKR 6.7bln, and downloads grew 31% to 12.3mln. During CY24, the Bank’s gross performing advances book increased to PKR 226.4bln (CY23: PKR 197.6bln) primarily attributable to individuals, financial and textile sectors. However, gross NPLs increased to PKR 21.3bln (CY23: PKR 16.2bln), leading to a rise in the infection ratio to 8.6% from 7.6% YoY basis. The investment is composed of government securities, with a tilt towards floating-rate instruments. JSBL demonstrated solid growth in its deposit base, which increased to PKR 525bln in CY24 (CY23: PKR 486bln), reflecting improved customer acquisition and retention. At the end of CY24, the equity stood at PKR 43.7bln (CY23: PKR 40.3bln) with CAR at 13.24% (CY23: 12.53%). During CY24, the Bank’s net markup income recorded an increase of 22% to stand at PKR 27.3bln (CY23: PKR 22.4bln), attributable to a sizeable increase in markup earned recorded at PKR 109bln (CY23: PKR 92bln). The Bank’s non-markup income contracted to PKR 11.3bln in CY24 (CY23: PKR 12.2bln), primarily driven by a substantial decline in foreign exchange earnings to PKR 3.3bln from PKR 5.8bln. While dividend improved to PKR 2.3bln (CY23: PKR 1.8bln), it was insufficient to counterbalance the drop in FX gains. Additionally, provisions escalated to PKR 4.7bln, up from PKR 2.8bln on YoY basis. Consequently, the bottom line witnessed a dip to PKR 2.8bln (CY23: PKR 4.3bln) signaling a need for greater income diversification and a more resilient non-core revenue mix to sustain profitability.
The ratings depend on upholding asset quality, maintaining its share of advances and deposits in the banking sector, adding diversity to the income stream while maintaining a cushion in CAR, and a strong governance framework are critical.

About the Entity
JSBL incorporated in March 2006, commenced its banking operations on December 30, 2006. JSBL is a subsidiary (~71.21%) of JSCL, whereas the rest is widely spread. The overall control of the Bank vests in the Board including the CEO. Mr. Basir Shamsie joined as CEO in July 2018. He possesses work experience of more than 33 years, primarily in the banking sector. He is supported by a team of highly qualified and seasoned professionals.

About the Instrument
JSBL issued Tier II capital TFC ("TFC") amounting to PKR 2.5bln on Dec 28, 2021 having a tenor of 7 years and carries a profit rate of 6MK +2%. The TFC is subordinated to the payment of principal and profit, to other indebtedness, including deposits. Neither profit nor principal will be payable if such payment will result in a shortfall in the Bank’s MCR or CAR. They are callable after 5 years with SBP approval and may be fully or partially converted to shares or written off on SBP’s PONV trigger. Major Principal Repayment (99.76%) would be paid in two equal semiannual installments of (49.88%) each, in the last year. The latest payment of PKR 278mln has been made at end of Dec 28, 2024.