PACRA Maintains the Entity Ratings of JS Bank Limited

The ratings reflect the relative position of JS Bank in the country's competitive banking landscape. This stems from largely intact customer deposit system share (end-Dec22: 2.0%, end-Dec21: 2.2%). The funding base comprises borrowings and deposits. The deposit base reflects a higher concentration of term deposits. The focus of the bank has been to optimize its cost structure and build profitability around the branch network and customer base. With the concerted efforts of the management, the bank has been able to improve its core profitability. The latest numbers, as represented by the management are sanguine. There is an enduring focus on digital spending which is expected to yield a return in the days to come. The strategy revolves around creating a more balanced approach to customer acquisition and offering unique digital solutions to customers. The bank has made a substantial capital investment in its digital proposition and launched a new brand `Zindigi', which has been designed to tap the market of Gen Z and millennials by offering them simple and user-friendly digital financial solutions. The net advances illustrated a decline owing to the continued efforts of consolidation. The investment portfolio displayed a sizeable increase YoY majorly vested with government securities. The continuous increase in non-performing advances is a cause for concern. However, despite the buildup in NPLs and reduction in Credit portfolio, the loan infection ratio (6.8%) remained lower than the industry average. Going forward, management will focus on enhancing coverage of NPLs and other recoveries. Markup income witnessed an increase attributable to a higher contribution of markup from investments. Despite higher provisioning expense, the bank's bottom line clocked at PKR 965mln (CY21: PKR 1.3b1n). During 1QCY23, the markup earned increased sizably whilst the non-markup income portrayed attrition. The net profitability recorded an enormous growth to stand at PKR 856mln (1QCY22: PKR 410mln). The enhancement of equity stake in a rising Islamic bank of the country is at an advanced stage. This will benefit the bank, going forward. The bank has assembled a highly experienced and qualified management team to head various departments. In order to strengthen the risk management framework, the bank has segregated credit and risk functions into different sub-categories based on functions and geographies.
Ratings are dependent on JS Bank's ability to sustain its profitability to support the internal generation of capital. Meanwhile, upholding asset quality, maintaining its share of advances and deposits in the banking sector, adding diversity to the income stream, maintaining a cushion in CAR, and a strong governance framework 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 (~75.02%) of Jahangir Siddiqui and Co. Limited (JSCL), whereas the rest is widely spread. The overall control of the bank vests in the Board of Directors (BoD) including the CEO. Mr. Basir Shamsie joined as CEO in July 2018. He possesses work experience of more than 29 years, primarily in the banking sector. He is supported by a team of highly qualified and seasoned professionals.