The Pakistan Credit Rating Agency Limited
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Saliha Sajid

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PACRA Maintains Entity Ratings of JS Bank Limited

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

The ratings reflect improving relative position of JS Bank in the country's competitive banking landscape. This stems from enhanced system share (approaching 2% of deposits at end-Dec16 and end- Mar17). The bank added a sizable amount of PKR 85bln to its deposit base in 2016. The benefit has dripped down whereby concentration - both in deposits and advances - is improving. Expansion in branch network is supporting deposit mobilization drive. Meanwhile, JS Bank is carefully building its loan book; although asset quality is largely maintained. The strategy of the bank is i) to foster penetration of existing network beyond 307 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. The challenge to profitability is drying stream of capital gains. JS Bank has adequate capital level (CAR at end-Dec 16: ~14% primarily tier I). However, credit expansion may put some pressure on CAR, for which the bank has option to add support through tier II capital.<p>Ratings are dependent on JS Bank's ability to maintain its growth continuously to establish itself in the medium-sized banking space of Pakistan. Meanwhile, upholding asset quality, maintaining system share in terms of advances and deposits, adding diversity to income streams and strong governance framework are critical.

About the Entity
JS Bank Limited (JSBL), incorporated in March 2006, after the merger of the Pakistan branches of American Express Bank Limited (AEBL) and Jahangir Siddiqui Investment Bank Limited (JSIBL), commenced its banking operations on December 30, 2006. The bank has achieved significant growth in terms of its outreach (Branches at end-Dec16: 307; end-Dec07: 9). JSBL is a subsidiary (~70%) of Jahangir Siddiqui & Company Limited (JSCL). Other shareholders include Banks and Financial Institutions (~4%), and Foreign Investors (~3%) while the remaining stake is distributed amongst local individuals and other shareholders.<p>The overall control of the bank vests in the Board of Directors (BoD) including the CEO. The board is the combination of Independent Directors, Non-Executive Directors and Executive Director. Mr. Khalid Imran, the President/CEO of the bank, possesses substantial and well-rounded professional experience. He brings with him over 40 years of work experience in Pakistani and foreign banks. Mr. Basir Shamsie is appointed as deputy CEO in May, 2017. He has possess work experience of three decades, primarily in the banking sector.

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.