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The Pakistan Credit Rating Agency Limited
Press Release

Date
25-Jun-18

Analyst
Saliha Sajid
saliha.sajid@pacra.com
+92-42-35869504
www.pacra.com

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This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA

PACRA Maintains Rating of JS Bank Limited | TFC II

Rating Type Debt Instrument
Current
(25-Jun-18)
Previous
(01-Mar-18)
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 in deposit and advances. The bank added a sizable amount of ~PKR 63bln to its customer deposit base YOY basis at Dec-17. The bank’s borrowings from financial institutions increased, alongside rise in SBP refinance. The increased liquidity has been deployed in advances (96% rise on YOY basis). The growth is substantial and needs continuous vigilance. The comforting factor is sizeable uptick in total investment book, of which government PIBs are dominant. The current NPLs absolute amount is low. 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. JS Bank has adequate capital level (CAR at end-Mar18: ~11.4% primarily tier I).
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. Khalid Imran, the President/CEO of the bank, possesses substantial and well-rounded professional experience. He brings with him over 41 years of work experience in Pakistani and foreign banks. Mr. Basir Shamsie has been appointed as deputy CEO in May, 2017. He possess work experience of more than 25 years, primarily in the banking sector.

About the Instrument
JSBL has issued unsecured, subordinated, and privately placed TFCs of PKR 3,000mln on Dec14, 2016. The issue amount support the bank to keep its Capital Adequacy Ratio (CAR) at comfortable level. The tenor of this instrument is 7 years ending in 2023. Profit is based on 6M-KIBOR Plus 140bps p.a. payable semi-annually in arrears. Major Principal Repayment (99.76%) would be in two equal semi-annual installments 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.
JSBL has issued unsecured, subordinated, and privately placed TFCs of PKR 2,000mln on December 29, 2017. The tenor of this instrument is 7 years ending in 2024. Profit is based on average 6M-KIBOR Plus 140bps p.a. payable semi-annually in arrears. Major Principal Repayment (99.76%) would be in two equal semi-annual 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.

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.