The Pakistan Credit Rating Agency Limited
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Saliha Sajid

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PACRA Maintains Entity Ratings of BankIslami Pakistan Limited

Rating Type Entity
Action Maintain Maintain
Long Term A+ A+
Short Term A1 A1
Outlook Stable Developing
Rating Watch - -

The ratings reflect BankIslami's sustained risk profile. The bank has focused on high growth in terms of advances while aligning its deposit share. The asset yield has benefited as the bank continual expansion in the high profit segments: Car lease and Housing finance amongst others. The bank also restrained the quantum of high cost of deposits, rationalising its cost of funds. Hence, spread witnessed sustainability. The significant milestone is that the bank has achieved its pre-provisioning operational break-even. It is a good omen and will reflect positively on its profitability, going forward. The NPLs are a concern, especially the borderline cases. The bank is expected to revisit its strategy as the new CEO fully takes over.
The ratings require sustainable improvement in BankIslami’s operational performance, in turn, maintaining positive trend in bottom-line. At the same time maintaining a strong capital adequacy while pursuing growth is important. Any downward spiral in profits, or incidence of non-performing assets with consequent impact on equity may negatively impact the ratings.

About the Entity
BIPL, a scheduled Islamic bank, commenced operations in Apr-06 and is listed on the Pakistan Stock Exchange. BankIslami Pakistan Limited acquired defunct KASB Bank Limited, which stands merged with and into BankIslami effective May 07, 2015. Post-acquisition, BIPL has a branch network of 322 branches. The four business groups hold a cumulative ~76% stake namely Jahangir Siddiqui & Company Limited (JSCL) (21%), Mr. Ali Hussain along with SAJ Capital Management Limited (21%), Randeree Family (~20%), and Dubai Bank PJSC (14%).

BIPL's board of directors (BoD) comprises eight members including CEO and two independent directors. Mr. Hasan A. Bilgrami, the founding CEO and possessing experience with leading
financial institutions, has been instrumental in the development of the bank and stays as the key resource. Mr. Hasan A. Bilgrami, who had indicated his interest to pursue other professional interests, will remain available as an adviser to the bank till Dec-18. Mr. Syed Amir Ali has joined the bank as Deputy CEO in Apr-18. He will take up the CEOship in Oct-18. He is Chartered Accountant by qualification, carried a more than one decade experience mainly with Meezan Bank.

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.