The Pakistan Credit Rating Agency Limited
Press Release


Aisha Khalid

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PACRA Assigns Instrument Rating to PPTFCs of JS Bank Limited

Rating Type Debt Instrument
Action Initial Preliminary
Long Term A+ A+
Short Term - -
Outlook Stable Stable
Rating Watch - -

The rating of unsecured, subordinated, and privately placed TFC is primarily based on long term rating of JS Bank - the issuer. The rating of JSBL reflect its strengthened position in the country's competitive banking landscape. This emanates from enhanced system share (approaching 2% of deposits at end-Sep16). The benefit has trickled down whereby concentration - both in deposits and advances - is approaching adequate levels. Expanded branch network is supporting deposit growth. Meanwhile, JS Bank is carefully building its loan book; although asset quality is good. The strategy is to i) foster penetration of existing branches while expanding the network beyond 300 branches over the near-term; ii) spread advances book through different products over multiple sectors; iii) build non-fund based income; and iv) hold strength in treasury operations. JS Bank has adequate capital level (CAR at end-Sep16: ~12% primarily tier I). However, for credit expansion, the bank is in process of issuing this tier II TFC.

Rating is dependent on JS Bank's ability to maintain its growth trajectory to establish itself in the medium-sized banking space of Pakistan. Meanwhile, upholding asset quality, adding diversity to income streams, and strong governance framework are critical

About the Entity
JS Bank, in operations since December 2006, operates a network of 278 branches at end Sep16. Listed on the Pakistan Stock Exchange since 2007, JS Bank is a subsidiary (70%) of Jahangir Siddiqui & Co. Limited (JSCL) which is majorly owned by Mr. Jahangir Siddiqui and family. JS Bank, through its subsidiaries - JS Global Capital Limited (67%) and JS Investments Limited (65%) - and group associates, is well placed to develop a financial services hub. JS group is key shareholder in BankIslami Pakistan Limited and EFU Insurance; in addition to investments in other economic sectors.

BoD consists of nine members including the CEO. Mr. Ali Jehangir Siddiqui has recently been elected as Chairman of the board. JSCL is represented by five directors on the board. Mr. Khalid Imran, the President/CEO of the bank, carries extensive experience in banking. He is supported by an able team. The bank has attained relative stability in top team.

About the Instrument
JSBL has issued an unsecured, subordinated, privately placed TFCs of PKR 3,000mln. The issued amount contributed toward JSBL’s Tier II Capital to meet CAR requirements. The tenor of this instrument is 7 years ending in 2023. TFC is callable after five years subject to approval of SBP. Profit is based on 6M-KIBOR Plus 140bps p.a. payable semi-annually in arrears. Major Principal Payment (99.76%) would be in two equal semi-annual installments of (49.88%) each, in the seventh year.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.