The Pakistan Credit Rating Agency Limited
Press Release


Saliha Sajid

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PACRA Assigns Initial Rating to JS Bank Limited | TFC Tier 1

Rating Type Debt Instrument
Action Initial Preliminary
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 in deposit and advances. The bank was able to maintain its customer deposit base at 9MCY18. The bank’s borrowings from financial institutions decreased. The increased liquidity has been deployed in advances (26% rise on YOY basis). The growth is substantial and needs continuous vigilance. NPLs have emerged in the recent period, which is a concern. The strategy of the bank is i) to foster penetration of existing network beyond 323 branches over the near-term; ii) spread advances book through different products over multiple sectors; The Bank has designed a broad spectrum of new products. iii) build non-fund based income; and iv) hold strength in treasury operations. The challenge to profitability is dried return of capital gains. The bank expects the profits to be boosted from growing direct and ancillary business. The bank is facing a challenge on its CAR. The management is pursuing another issue of bonds-Tier I this time to bolster its CAR. It would only enable it to comply with regulatory requirement for December 2018. Further room need to be created.
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 stream, sound CAR and 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%) of Jahangir Siddiqui & Company 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. Suleman Lalani has been appointed as Director, w.e.f October 01, 2018 and Chairman w.e.f October 26, 2018. He himself accompanied with diversified experience. Mr. Basir Shamsie joined as CEO in July, 2018. He possesses work experience of more than 25 years, primarily in the banking sector.

About the Instrument
The bank has issued two TFCs which are unsecured, subordinated, privately placed to support Tier-II capital. The first TFC was issued in Dec-16 of amount PKR 3bln and other was issued on Dec-17 of amount PKR 2bln. The tenor is 7 years each based on 6M-KIBOR Plus 140bps p.a. payable semi-annually in arrears. Major Principal Repayment (99.76%) would be in two equal semiannual instalments of (49.88%) each, in the seventh year. JSBL retains the call option on profit payment date, which may be exercised, on or after five years of issue, subject to SBP’s approval.
JS Bank's has issued another Privately Placed / Listed, Unsecured, Subordinated, Perpetual and Non-Cumulative debt instrument, on Dec-18 in the nature of Additional Tier 1 Capital TFC of PKR 2,500 Million. The purpose of the issue was to contribute towards additional Tier I for CAR as per guidelines set by SBP. Profit rate would be 6M-KIBOR+ 225bps. Profit (if declared) will be payable semi-annually in arrears on the outstanding Issue Amount. First such profit payment will fall due on June 30, 2019, which is six months from the Issue Date (i.e December 31, 2018) subject to SBP’s approval. SBL retains the call option on profit payment date, which may be exercised, on or after five years of issue, subject to SBP’s approval.

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.